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Some general demonetisation advice: This too shall pass

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K Srinivasan
K SrinivasanNov 21, 2016 | 18:51

Some general demonetisation advice: This too shall pass

I perceive the demonetisation move of the government more as a sanitisation measure after the surgical strikes on terror launchpads in Pakistan, than an economic strategy, per se.

In the wake of the meeting Prime Minister Narendra Modi had with the Chief of Army Staff came the announcement that notes of Rs 500 and Rs 1,000 are being demonetised with effect from midnight on November 8.

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It is not anything new. Every 10 or 20 years, a temporary demonetisation of currency takes place to cleanse the system of black money. But this time, it is more than just routine.

What is not understandable, however, is the re-issue of 500 and 1,000 rupee notes and, what is worse, the circulation of new 2,000 rupee notes. 

It looks like an act of tipping one's hat to those who want to hoard more black money; and it is only half as easy now to put away twice as much of black money with the garish-looking 2,000 rupee note.

The scramble and scrunch to change old money for new will get over soon. Those with bank accounts can route money through their accounts and draw for immediate needs.

Regular account holders use debit/credit cards and cheques for routine financial transactions which they are keen to capture for accounting and taxation purposes. 

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The scramble and scrunch to change old money for new will get over soon. (Photo: Bloomberg)

The problem is with the unorganised population, which is immensely large. The rush at banks is caused by those who have no accounts and hence have to queue up for hours to exchange old rupee notes for new, and up to Rs 4,000 per person only. It sounds a bit too unkind and impractical.

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The ATMs are overflowing with credit card-holders. In panic, they are overdrawing their balances, forgetting that they need to pay it all back with interest and bank charges, which are substantial.

Regular debit card-holders are not much worried, because for them it is drawal from a buffer which they can afford to do, and pay even through net banking rather than over-the-counter. 

When the limits are raised, i.e. when the RBI puts more fresh notes in the hands of banks  and post offices, people will be able to move with greater ease.

It is not as though a lot of money is out there for everyone to draw. Resources of all middle and lower income groups are finite. So, they can afford to withdraw money a bit slow, after of course making necessary arrangements for their daily expenditure.

You can draw or deposit cash upto Rs 2.5 lakh if you don’t want the tax inspectors to track you down and demand account statements. If your deposits exceed Rs 10 lakh, be assured of a visit by them.

So my advice is, bide your time. Take your turn. Keep calm. Don’t fret over the small stuff. You have all the time in the world to carry out your money transactions and explain yourself as well, if called upon to do so. Otherwise, take it easy and let the process of change work through the economy. 

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Last updated: November 21, 2016 | 18:51
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