According to the latest reports, a total of Rs. 3.18 lakh cr are in circulation since the end of March 2005. There is a possibility that a good amount of this might be hidden away in lockers as black money. Speculators believe that RBI’s move to phase out notes may wash out this unaccounted income. But amongst all this what exactly is likely to happen? What can be its effects? Can it harm us in any way? Will this move be able to complete its mission successfully? These are some of the questions that are still hovering in the minds of the common man.
So let us delve into this deeper. Following are the consequences that might take place:
- There may be requests to open lockers to clear the old stock.
- Gold demand could rise, property may be affected
1. Those unable to recycle old notes may stock up on gold
2. It could also impact the property market as notes printed before 2005 may not be accepted
- There could be some rise in spending as cash stashed away is spent
- There may be some demand for dollars in lieu of these funds.
So how will it help the RBI to weed out fake currency notes? From July 1 onwards, to exchange more than 10 pieces of Rs 500 and Rs. 1000 notes, non-customers will have to furnish proof of identity and residence to the bank branch in which he/she wants to exchange the notes. So, it won’t be easy for the black money operators to exchange their pre-2005 currency notes without going through the bank’s proper procedures and verification.
On the contrary this move will be disruptive for transactions. But Raghuram Rajan has cleared the air by saying that “This is not an attempt to demonetise. It is an attempt to replace less effective notes with more effective notes. I understand that people are making different interpretations. Unfortunately that should not be the interpretation.” But this has already triggered panic among the people and it needs awareness. Shopkeepers and small shops have stopped accepting these notes already. Also not many banks will have a huge amount of cash stock. Thus the RBI needs to act soon. People need to be reassured that they won’t be required to face the cons of this decision of the RBI.