November 16, 2016: The government of India took a big step to uncover the black money in the country. The government demonetized ₹500 and ₹1000 banknotes on 8th November, 2016 and ceased the use of the banknotes in any form of legal tender in India.
Prime Minister Narendra Modi addressed the people in an unscheduled live televised address at 8:15 pm the same day. In the announcement, Modi declared the usage of ₹500 and ₹1000 banknotes and told everyone that the notes can be exchanged at the banks until December 30. But a long queue outside every ATM and bank has hampered the process, mentioned Reuters.
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It seems that RBI was not prepared to face the demonetization. RBI didn’t have enough supply of the notes for the exchange. Also, the new notes of ₹2000 are of different size and so the ATM machines need to be modified to dispense the notes. There is a long queue of people waiting to exchange their notes. ATMs are running out of cash faster as they can dispense only ₹100 notes.
The under-preparedness of government has led to the creation of extreme chaos. The move is considered economically imprudent.
According to Reuters report, people are desperate for cash and so the workforce is wasting long hours standing in the long queues at the Banks and the ATMs. The abrupt call-back for the 86% of the country’s cash has brought the economy to a standstill. The wide conjecture on property and gold has affected the economic stability and investments.
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The people most hard hit by the demonetization are the ones in the rural areas who do not have a bank account. Indians who rely on cash for their daily transactions are struggling to pay for the basic commodities.
In a political rally in Uttar Pradesh, Modi said, “I am aware you are facing difficulties… I understand the inconvenience.”
“I am really pained by the inconvenience and that is why I am working tirelessly to help people overcome this situation.”
“I will never let anyone loot money that belongs to India’s poor.”
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The government has been trying hard to deal with the cash crunch. New micro cash machines will be installed across the country and banks are asked to waive off the transaction charges on credit and debit cards.
India’s secretary for Economic Affairs, Shaktikanta Das, told reporters that government has increased the weekly withdrawal limit from 20,000 to 24,000. He also said that the re-calibrated cash machines would start to dispense new 2,000 rupee notes within two days.
The government has allowed a network of banking correspondents to provide people from rural area access to the banking services.
– Prepared by Diksha Arya of NewsGram. Twitter: @diksha_arya53