Indian 1000 and 500 rupee notes will be withdrawn overnight as India turns up the heat in its attempt to rein in ‘black money’. It is a very bold move that has taken the market by surprise but considering Indian Prime Minister Narendra Modi’s party promise of flushing black money out of the system in 2014, it starts making sense, especially with critics pointing fingers.
India previously offered a four-month tax amnesty for tax evaders that resulted in nearly US$10bn of hidden income/assets being uncovered. The government gave the market a chance to come clean, and now they are taking off their gloves for those who choose to remain in the dark.
INR1000 and INR500 notes can be deposited/exchanged with a time limit of 30th December for deposits and 24th November for exchange, with the caveat of all transactions being watched and recorded by the financial system and monitored by the Indian government.
Taking into account the 1.3bn population of India and the fact that it is a cash intensive economy, 7 weeks to exchange or deposit all the notes will not be enough. It will most likely be extended and this short deadline seems only to exist to pressure the black market. However, this is not all good news as poor and illiterate families without much knowledge and understanding will probably be taken advantage of, and could even be used by money launders to input ‘black money’ into the system to help launder the proceeds.
As for now Pacific Exchange is not accepting INR1000 and INR500 notes until the market stabilizes, which will probably be in December or at the beginning of the New Year.
Update: We are now accepting old INR notes at a discounted rate until the end of 2016. Please call ahead to reconfirm the exchange rate and to check if there is any change to this policy before you come.