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Currency Reset in India causes Panic and Chaos with Massive hit on Black Market

 
 
 
 
 
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People queue outside outside RBI headquarters in New Delhi to exchange old high denomination bank notes in Old Delhi, India.

People queue outside outside RBI headquarters in New Delhi to exchange old high denomination bank notes in Old Delhi, India.

Visitors to India risk seeing their money become worthless after the Indian government suddenly discontinued all 500 and 1,000 notes this week.

Catching the whole country unawares on Tuesday, Prime Minister Narendra Modi made the move to crackdown on tax evasion and corruption.

The notes, equivalent to £6 and £12 and very widely held, were immediately invalidated and unusable – sending banks into chaos as millions flocked to cash in the notes.

ATMs were closed for much of last week and massive queues built up yesterday when some reopened. Most quickly ran out cash.

Many low-income Indians, traders and ordinary savers who rely on the cash economy have been badly hit.

Indian residents and visitors alike have until 30 December to exchange their 500 and 1,000 rupees notes for smaller notes or for the new 2,000 notes, after which date they will become worthless.

Tourists who are currently in India can exchange the discontinued notes for a value of up to 5,000 rupees at airport exchange counters – although some sources report this might only be allowed until Friday.

There is a maximum cap of 4,000 rupees per day in cash, while anything above that amount will be paid into a bank account – if the holder has an Indian one.

Many westerners backpacking around India carry substantial amounts in cash as some regions are rural and remote, with few ATMs. Those heading to towns to find a bank may well be at the back of a queue of thousands.

Meanwhile, those in the UK who are still in possession of 500 and 1,000 rupees notes are unable to exchange them.

Indian banks with branches in Britain – State Bank of India, ICICI and Punjabi – said they won’t accept the discontinued notes.

This means that, unless travellers are heading back to India before the end of the year or have friends or family heading there in the short-term, they are set to see their cash become worthless.

‘State Bank of India UK does not deal in Indian Rupee Notes from our UK branches and hence, we will not be in a position to handle the Rupee note exchange process (including withdrawal of old notes),’ the Bank says in a note.

Rupees are a ‘closed currency’ – meaning they are not supposed to cross borders.

However, since 2014 both residents and non-residents of India are allowed to take up to 25,000 rupees in and out of the country.

This is with the exception of citizens of Pakistan and Bangladesh or those coming from or going to these countries.

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