The Indian prime minister Narendra Modi took 500 and 1000 rupee notes out of circulation on November 8 with immediate effect in a bid to stop corruption, ‘black money’ and tax evasion, meaning around 86% of the country’s currency was made worthless overnight. The banks were closed until the 10th and the ATMs weren’t open again until the 11th/12th.
With 1.3 billion people in India you can imagine the chaos this caused as everyone rushes to a bank to try and exchange their 500/1000 rupees notes for 100 rupee notes – the biggest note left after the demonetisation. After a week or so, a 2000 note was brought into circulation but with a shortage of cash, most businesses aren’t able to give change from a 2000 note. The new 500 rupee notes are still awaiting their grand debut (and it’s already a month later). Indians are able to deposit the old notes in their bank accounts until the end of December, and everyone was able to exchange their old notes for just 10 days after the announcement. There was an official limit of 4,000rps per day on exchanging but as cash was running low, in order to give as many people as possible ‘something’ the limit was generally set at 1000 or 2000.
However, a lot of poor people and rural workers don’t own bank accounts, or even I.D cards, or live anywhere near a bank. Most businesses have lost profits because of it, and some have to close their businesses for days at a time just so they can go and queue at a bank.
All of the locals I spoke to about it were surprisingly upbeat and happy about the change, they understand it’s a positive move, but it’s going to take some time before everything calms down and functions normally again.
As a tourist at this time it means not knowing whether you will find a single open ATM in the town/city you are in that has cash inside. When you find one the queue will be an hour or more long and the maximum withdrawal is 2,000 rupees (£23) at a time (although if you are quick and the huge crowd behind you isn’t screaming at you too loudly to move on – you can sometimes put in your card multiple times and get more out).
Although India is dirt cheap, without access to cash it becomes a lot more expensive.Card machines are few and far between and usually add an extra 20-30% onto your bill for the luxury of doing so. Bringing your meal closer to the price of a Western one, as oposed to the 30rps thali you’re used to.
Western Union is somewhere I always avoided unless desperate due to their charges, HOWEVER, in India right now they are probably your best bet. There is a limit of 4,000rps per transaction (not sure if that means per day or if you can do multiple?) and so many offices with no queues. If you have a bank card that charges for foreign transactions, this may actually work out cheaper for you. (I recommend Halifax’s Clarity Credit card for travel – no fee’s for overseas!)
After two glorious months in India, one month dealing with the financial crisis, I decided to head to Sri Lanka and return when everything has settled down. Feeling thankful I had reached Rajasthan before it happened as the North-East suffered more drastically I’ve heard, and the cost of living was generally a lot more expensive over there, so would have struggled for sure.
Generally locals have been helpful and kind – and one bonus of having no cash is that people tend to hassle you less to buy things!
It was a bold move and I hope it works out for India, but probably best to avoid as a tourist until things have settled down a bit.
If you are planning to visit, I’d advise take cash in either US Dollars or Euro and shop around for the best exchange rate when you arrive.