Another day, another set of late-evening twists in India’s experiment in warp-speed currency replacement.
Indians can no longer exchange their voided 500- and 1,000-rupee bills for newly minted currency at banks and post offices, after the Ministry of Finance tightened its crackdown on cash Thursday night.
Ever since Prime Minister Narendra Modi abruptly invalidated the big bank notes this month, millions of Indians had been lining up for hours each day outside banks to swap their old cash. But the finance ministry said the number of people making such exchanges has been on the decline. It also said ending the option will help spur people who don’t already have a bank account to open one. Old notes can still be deposited in bank accounts through Dec. 30.
The ministry had been concerned that the exchange service was being abused by wealthy Indians enlisting poorer folks to swap their cash a little at a time at multiple bank branches. Last week the government lowered the amount of money a person can exchange to 2,000 rupees from 4,500 rupees. It also clarified that each person can only make one such swap, ordering banks to mark people’s fingers with indelible ink to prevent repeat visits.
Now exchanges aren’t allowed at all—except, as the Reserve Bank of India said Friday, at the central bank’s offices. It’s unclear whether this will create further difficulties for people who still haven’t received the new notes, which have been slow to reach many corners of the country.
The finance ministry on Thursday also said people could continue using old bills for certain purposes—to book train tickets, pay utility bills, buy prescription drugs and milk from state-run dairy vendors, and more—through Dec. 15. In Mr. Modi’s original Nov. 8 announcement, these exemptions were to be given for 72 hours. Gradually, more carve-outs were added, and they were extended through Thursday.
The latest announcement also included new types of payments for which old notes can be used, such as topping up cellphone balances and settling tuition bills at government schools.
But the finance ministry also said that payments in these exempted categories can only be done in 500-rupee notes from here on out. That is likely a response to concerns that such payments were being made, not only by people in urgent need of the services, but also by rich people looking to unload their cash piles. The government’s assumption is presumably that 1,000-rupee notes are more likely to be used by Indians with high heaps of untaxed cash.
The bottom line after Thursday’s moves: If you still have 1,000-rupee notes, the only thing you can do with them now is deposit them or exchange two of them at an RBI office.
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