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Ban on 500 and 1000 Currency Notes in India

In one of the historical reforms of the economy of India, 500 and 1,000 notes were banned, effective from 08th Nov 2016 Tuesday midnight. There are few reasons behind this bold movement. • Increased fake higher denomination currency notes • Misused by Terrorist for hoarding Black Money
Ban on 500 1000 “ Currency notes in IndiaIn one of the historical reforms of the economy of India, th 500 and 1,000 notes were banned effective 08 Nov 2016 Tuesday midnight. INTRODUCTION This was one of the boldest movements by the Government of India announced over a 40minute speech. The majority of industry and commoners alike reacted to this decision with overwhelming support. Whereas some sections are of the opinion that it is a draconian scheme causing hardships to people.Why the ban and what it is all about• Increased fake higher denomination currency notes. • Fake notes used for AntiNational Illegal Activities. • Misused by Terrorist for hoarding Black Money. • NonDisclosure of Source of Income • To stop Illegal funding to political parties during elections • To encourage cashless transactionsContinued…  As per this scheme the legal tender character to the currency notes in Rs. 500 and Rs. 1000 denominations are withdrawn.  Due to this, the old high denomination notes are invalid “ and cannot be used for any transactions nor can be stored as a value for use in the future.  These notes can now be exchanged for the same value of money at the RBI offices or at various bank and post offices.Continued… th  People can deposit their old currency till the 30 of December 2016 in their respective bank accounts.  No restriction on electronic fund payments or transfers “ including credit and debit cards including Internet BankingImpact of this decision on Various Sectors:The removal of these 500 and 1000 notes and replacement of the same with new 500 and 2000 Rupee Effect on Notes is expected to Parallel Remove black money from the economy as they will Economy be blocked since the owners will not be in a position to deposit the same in the banks, Temporarily stall the circulation of large volume of counterfeit currency and Curb the funding for antisocial elements like smuggling, terrorism, espionage, etc. With the older 500 and 1000 Rupees notes being scrapped, until the new 500 and 2000 Rupees notes get Effect on widely circulated in the market, money supply is expected to reduce in the short run. Money  To the extent that black money (which is not counterfeit) does not reenter the system, reserve Supply money and hence money supply will decrease permanently.  However gradually as the new notes get circulated in the market and the mismatch gets corrected, money supply will pick up.Effect on Prices Price level is expected to be lowered due to moderation from demand side. This demand driven fall in prices could be understood as follows: Effect on Consumer goods: Prices are expected to fall only marginally due to moderation in demand as use of cards Price and cheques would compensate for some purchases. Real Estate and Property: Prices in this sector are largely expected to fall, especially for sales of properties where major part of the transaction is cash based, rather than based on banks transfer or cheque transactions. In the medium term, however the prices in this sector could regain some levels as developers rebalance their prices (probably charging more on cheque payment).The GDP formation could be impacted by this measure, with reduction in the consumption demand. However with Effect on the recent rise in festival demand is expected to offset this GDP fall in overall impact. Moreover, this expected impact on GDP may not be significant as some of this demand will only be deferred and reenter the stream once the cash situation becomes normal. Share markets will for sure see the impact with the prices of the shares shooting higher. A negative impact can be Effect on seen on the cash focused sectors in the stock market. This Share can trigger to all round selling bringing down the indices from their present levels. Market  This move will also impact and lower the political spending during elections especially in states like Punjab and UP where huge cash is spent during elections. As directed by the Government, the 500 and 1000 Rupee notes which now cease to be legal tender are to be deposited or exchanged in banks (subject to certain limits). Effect on  This will automatically lead to more amounts being deposited in Savings and Current Account of commercial Banks banks.  This in turn will enhance the liquidity position of the banks, which can be utilized further for lending purposes.  However, to the extent that households have held on to these funds for emergency purposes, there would be withdrawals at the second stage. With cash transactions facing a reduction, alternative forms of payment will see a surge in demand. Effect on Online  Digital transaction systems, Ewallets and apps, online Transactions transactions using Ebanking, usage of Plastic money (Debit and Credit Cards), etc. will definitely see substantial and increase in demand. alternative modes of  This should eventually lead to strengthening of such systems and the infrastructure required. paymentA Glance on 2000 Rs. For Security Purpose • See through register where the numeral 2,000 can be seen when note is held against light. • Latent image of 2,000 can be seen when the note is tilted. • Devnagri denomination. • Portrait of Mahatma Gandhi. • Micro letters 'RBI' and '2,000'. • Color shift security thread with 'RBI' and '2,000'. • Guarantee clause, Governor's signature and RBI emblem on the right. • Watermarks of Mahatma Gandhi and electrotype 2,000 numeral. • Number panel with numerals growing from small to big on top left and bottom right sides. • Denominational numeral with Rupee symbol, 2,000 in colour changing ink. • Ashoka pillar emblem. • Rectangle with Rs.2,000 in raised print on right. • Seven angular bleed lines in raised print.A 2000 Rs. Note⊙Government reveals shocking tax percentage for black money holders Providing a window to black money holders, the government proposed to levy a total tax, “ penalty, and surcharge of 50 percent on the amount deposited post demonetization while higher taxes and stiffer penalty of up to 85 percent await those who don’t disclose but are caught. The Rupee value will slowly strengthen as the time passes.  The inflation too would go down and this would benefit the middle and the lower class people.  More people will be inclined towards converting “ paper to gold and this can increase the investments made in the gold monetization schemes.  Does this mark the beginning of the end of black money in India Let 's wait and watch.Thanks Any questions You can find us at queriesthesisscientist.com
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