Rs. 500, Rs. 1,000 notes no longer legal tender
The Union Government has announced that Rs. 500, Rs. 1,000 notes will cease to be legal tender. It was announced by Prime Minister Narendra Modi in a surprise address to nation.
The demonetisation drive of these two currency units was taken to root out the menace of black money, corruption and fake currency from the country. The currency notes of 100, 50, 20, 10, 5, 2 and 1 rupee will remain unaffected by this decision and remain legal tender.
- Persons holding old 500, Rs. 1,000 notes must deposit these notes in their bank or post office accounts from 10th November till 30th December 2016 without any limit.
- Those who are not able to deposit 30th December 2016 can go to the specified offices of RBI up to 31st March 2017 and deposit the notes after submitting a declaration form.
- However, for immediate needs, old 500, Rs. 1,000 notes can be exchanged in any bank, head post office or sub post office by showing identity proof like Aadhaar card, voter card, ration card, passport, PAN card or other approved proofs.
- The limit for such exchange will be four thousand rupees till 24th November, and will increase from 25th November till 30th December 2016.
- The Reserve Bank of India (RBI) will issue new 500 and Rs. 2,000 notes from 10 November 2016.
- There will no restrictions of any kind on non-cash payments by cheques, demand drafts, debit or credit cards and electronic fund transfer.
What is Demonetisation?
It is an act of stripping a currency unit of its status as legal tender. Demonetization is mandatory whenever there is a change of national currency. In this process, the new currency unit replaces the old unit of currency which is retired.
Demonetisation in India
This is not the first time the Government or the RBI has demonetised currency in India. For the first time in January 1946, Rs 1,000 and Rs 10,000 banknotes were demonetised. However, these two denominations were reintroduced in 1954 along with currency notes of Rs 5,000. But all these three denominations were again demonetised in January 1978. The RBI more recently in 2014, had demonetised all banknotes printed before 2005.