Ban on 500 and 1000 rupees currency notes comes as a surprise to everyone in the country. Keeping the point of combating corruption and black money aside, the move lets a short term pain for working class, small businesses. And the question arises in the sector is Why was this decision of replacing notes taken? What effect will it have on customers, banks and India Inc?
Accepted fact is that all the unaccounted black money is often used in any form of corruption or illicit deals, and high-value notes opt for exchange. Rs.500 notes and Rs.1000 rupees notes constitute a huge percentage of the currency spent in illegal form. The share of the higher value notes is being increased over the past few years, and undoubtedly natural growth expansion of our economy is credited for this.
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Prime Minister decision of decommissioning Rs 500 and Rs 1000 notes should not cause inconvenience to individuals in the long term. But a major negative impact on the decision comes from the working class and rural businesses in the short-term.
Let’s get into the beneficial factors of this move (Pros):
- It helps the government to fight corruption, Black money, counterfeit currency and terrorism with one single decision
- The immediate effect on the lack of funding chokes the espionage, arms smuggling, and terrorist related activities.
- This bold move enables to fight against the counterfeit currency used for financing terrorism
- Limiting ATM withdrawals will encourage cash less card payments across the country
- Tracking of money is made easy as the exchange is only available by producing valid identity proof like Aadhaar, PAN, and Election Card
- Benami transactions will be blown away as the new legislation provides a provision for seven-year imprisonment or fine, or both.
- The decision results in more transparency in the Indian real estate industry. Indian real estate sector gets more credibility and attracts domestic and foreign investors.
- Housing prices may witness a downfall restoring demand in the housing segment
- The step also results in the end of artificial hype created in Real Estate.
- Higher Education and Healthcare transactions will come in the reach of an ordinary man.
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There are few factors which effect in the other way (Cons):
- Overnight end of transactions through existing notes will cause a dark incontinence to the people who need to rush to the near banks for exchanging the notes.
- The cost of printing the additional money will observe a four-fold increase. ATM operating expenses also will get increase in parallel (results in refilling more often)
- More than half of the population may face difficulties that are not familiar with the card transactions.
- Detection of fake notes will remain a question as the government didn’t declare on that.
- The decision will have a deep impact on the daily wage section society which works in the informal sector.
- Smaller businesses will be affected in the short run
- Black money in the form of Gold and foreign currency will remain unturned.
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The announcement of decision leaves all in a jaw drop while the government has provided proper exemptions along with it. Hopefully, the aggressive decision will surely work on the nation and overcome the adverse effects soon.
