Cash Is No Longer King: How the Demonetisation of 500 and 1000 Rupee Notes is Affecting Travellers in India

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.

2 Replies to “Cash Is No Longer King: How the Demonetisation of 500 and 1000 Rupee Notes is Affecting Travellers in India”

  1. I’m glad you wrote this! I’ve actually had my own 2 cents drafted but un-posted for a few weeks now. I was over there when it first kicked off, and for a good few weeks afterwards but luckily I was with a group of local friends so never had any issues as they were able to pay for everything for me and wait for me to get home to transfer to them. But I’ve been keen to read someone else’s view/how it affected them.

    In the long-term I do tend to agree with a lot of the locals in that it’s a good move for the country’s future but I really don’t understand PM Modi’s logic by bringing 2000 out before 500?! Surely it would have made sense just to do it the other way around? And apparently (so I’ve been told) given time the 2000 will be demonetised and replaced with a new 1000. Two days before I left (the last week of November) the banks were starting to give out 500s in Kerala and you’d swear it was like someone had started handing out cheques for $1million! Madness!

    Hope you have an absolute blast in Sri Lanka and here’s hoping the Indian money situation calms down soon for you to go back 🙂

    1. Hey, yeah it sucks for people who have booked their Christmas holidays out there, did you find people took it all surprisingly well? If that had happened in England there would have been riots! I managed to use the ‘ladies queue’ cut in a few times, which the men were happy to honour. I’m surprised the men weren’t sending their wives out to the ATMs as the ladies queue was always a fraction of the men’s. We stayed for a month after it happened too, and feel it got worse rather than better. Yeah it was totally backwards, and the 2000 note was too big! But as you say, it will calm down and I will go back eventually. Sri Lanka is refreshing – everything works and you can get anywhere in a few hours! Where are you now? X

Leave a Reply