India moves to wipe out ‘black money’

India’s 500 and 1000-rupee notes are no longer valid currency

The waiting game at the banks

Last Tuesday in a bold and controversial move, Prime Minister Narendra Modi demonetised India’s two largest banknotes—those worth 500 rupees and 1000 rupees. Suddenly these bills—worth about A$10 and A$20 each—were essentially worthless.

Modi took the step in an effort to curb the spread of ‘black money’ or the financial gains of corruption. Corruption is rife in India, involving politicians, public servants, business people—virtually anyone who thinks they can get away with it.

The Prime Minister is so determined to halt corruption that he made the decision in secret, not even informing members his cabinet or other high ranking government officials. Clearly he did not want them offloading any of their ill-gotten gains.

We were in a homestay near the village of Koppe when the news broke, and luckily Anand and Deepti heard the broadcast as it aired.

Here was the deal. As of midnight on the Tuesday, all 500 and 1000-rupee notes were no longer valid currency, although they would be accepted for some transactions and for exchange until 31 December. Hospitals, fuel outlets, tourism sites and the like were urged to continue to accept 500-rupee notes or credit cards. All banks were to be closed Wednesday and Thursday.

The honest wait to change their banknotes

Modi made it clear he was not out to disadvantage the poor and honest, but was keen to eliminate the huge stashes of money acquired through corruption.

Starting on Friday, people (including tourists) would be able to go to a bank and exchange 4000 rupees worth of larger notes per day (ID would be mandatory).

Anand and Deepti did the sensible thing on the Tuesday night, and drove into Koppe and withdrew the daily limit of cash. They were hoping the ATM would give them a mix of 100s and 500s, which it did.

I wasn’t particularly concerned for us. Anand and Deepti make it easy for their travellers. The trip is prepaid and virtually all-inclusive, so all our accommodation, meals, admissions, transport and such are already covered. We pay for souvenirs, special drinks, any extra excursions we choose and some tips.

Plus, I am a hoarder of change—more about that later—so even though we had about 20,000 in 500 and 1000-rupee notes (about A$400 or US$308), I had another A$40 in small bills. That would be more than enough to carry us over until the banks reopened on Friday.

I now have heaps of change—a discontinued 1000-rupee note topped by 100 brand new 10-rupee notes

There was overwhelming handwringing and complaints in the aftermath of the announcement. As an example, taxi and auto rickshaw drivers had to decline fares because prospective customers waved only 500-rupees note at them.  The same was true at small food stalls and other small operators. The buyers had small change, but didn’t want to part with it. The reality was that the announcement caught everyone unawares so these sellers simply did not have enough change to cater for so many requests.

But change is an issue most of the time, and especially for small operators. More than a week before the announcement was made, Poor John got a pair of shorts mended at a tailor’s in Goa. The fellow asked for 30 rupees (60 cents). Poor John had notes of 10, 100 and 500. The tailor chose to accept 10 rupees as payment rather than make change for a 100.

But back to the demonetisation.

We had a stroke of luck. Because of the outcry, there was a last minute decision to open banks on Thursday. This news was not widespread. In fact, we were surprised to  find Koppe’s small bank open after we finished a morning safari drive on Thursday.  (By the way, the jerk at the safari ticket office that morning wouldn’t take 500-rupee notes even though tourist outlets had been urged to do so. I could have slapped the smirk off his face.)

Anyway, Anand, Deepti and Poor John sashayed into the bank with photocopied IDs for the four of us. The bank’s photocopier wasn’t working, so a person couldn’t exchange notes unless they had their own photocopy (which the bank kept). Marian only had her passport, but no photocopies.

There were only about five people in the queue waiting to exchange notes, so the whole process went very quickly. The bank was already running low on cash, so only let each person exchange 2000 rupees.

Huge lines at banks

In an effort to exchange a share for Marian, we drove to the only Xerox shop in town (to get Marian’s passport photocopied) but it was closed. Then it turned out Sandeep (who doesn’t speak much English) got the gist of the conversation and produced a photocopy of his own ID. So in the end, we got 10,000 rupees worth of notes changed with little hassle.

Oh wait, there was a slight hassle. While Marian and I sat in the van waiting for the others to finish the banking, a policeman stopped and asked where the driver was. He said he’d noticed that our van had driven up and down the street four or five times that day and wondered what was going on.

Now Koppe isn’t a big place, but at one end of town are entrances to two stretches of vast wildlife parks. Out the other end of town are many kilometres of homestay places that cater for the tourists—Indian and foreign—who come to visit the parks. I suspect all tourists travel back and forth on that road all the time.

That said, I was so very tempted to tell him they were inside robbing the bank instead of exchanging the large rupee notes.

More waiting to change banknotes

It’s now a week later and we haven’t yet had a chance to exchange our large notes. We managed to spend a few in the first days, but now no one will take them. The queues at the banks have been overwhelmingly long—virtually thousands of people are waiting as we drive by.

ATMs are now dispensing only 100-rupee notes and a new 2000-rupee note has been released. A new 500 note is planned and the 1000 is to be scrapped completely.

Today Deepti found an ATM in a small town that was working and had only one person in the queue. Cash-wise Poor John and I are still fine.

Other people haven’t been so lucky! As of Saturday, quite a few banks were being investigated for exchanging large sums of notes without getting IDs, and up to 600 jewellers are under suspicion for taking large payments for goods.

Ah, the corruption continues.

One of the reasons I hoard change

I’ve hoarded change and small bills ever since I lived in Egypt in the 1970s. Shopkeepers loved saying they didn’t have change, so unless you had exact change you were usually out of pocket and sometimes by quite a bit. As a creature of habit, I still accumulate change.

It served me well in Burma in 1986 when U Ne Win demonetised the Burmese currency. He instantly withdrew all the 25, 50 and 100-kyat notes. A huge change given that an Australian dollar was worth 6 kyats.

And guess what? His astrologer advised him on good replacements, so we ended up getting 15, 35 and 75-kyat notes. Did wonders for our multiplication tables.

These rupee notes were not affected