As the Narendra Modi government demonetized 500 and 1,000-rupee currency notes on Nov. 8, reports from India suggest that the financial sector continues to brace itself to deal with the move’s impact.
Banks and post offices were thrown open to the people on Nov. 10, after a day’s shut down for the public, and they remain open since then even on Nov. 12 and 13 (Saturday and Sunday, which are weekend holidays).
However, anger intensified across the country on Saturday as banks struggled to dispense cash following the government's decision to withdraw the large denomination notes in an attempt to uncover billions of dollars in undeclared wealth.
Tempers frayed as hundreds of thousands of people queued for hours outside banks for a third day to swap 500 and 1,000-rupee bank notes, Reuters reported.
The banned bills made up more than 80 percent of the currency in circulation, leaving millions of people without cash and threatening to bring much of the cash-driven economy to a halt.
Meanwhile, the Saudi Embassy in India called on citizens who would visit India to replace Indian currency of 500 and 1,000-rupee notes.
"We would inform all citizens who are going to India that the Indian government decided, on Nov 8, to stop dealing with currency notes of 500 and 1,000. All citizens require to replace these notes at the nearest bank by Dec. 31. 2016," the Saudi Embassy in India said in a statement.
"There's chaos everywhere," said Delhi Chief Minister Arvind Kejriwal, a rival of the prime minister, accusing the premier of wreaking havoc on poor and working Indians while the wealthy found ways to skirt the new rules.
The dramatic announcement was made by the prime minister on television and radio after a hurriedly convened cabinet meeting, where the cabinet colleagues were asked to be present without their mobile phones and remain inside the meeting venue until after the announcement. That is how there was no leakage of the government move and the whole nation was caught unawares, reports said.
Banks are providing special exchange counters, but long queues are reported outside all of their branches across the country. In fact in many locations there has been chaos and confusion due to overcrowding, although the government has given time until December-end to exchange the notes with the new 2,000 rupee notes. The currency notes of all denominations up to 100 rupees continue to be legal tender.
Chaotic conditions are due to some bank branches running out of cash. The situation is the same with ATMs, which have reported lack of cash due to heavy demand. ATMs need to be recalibrated for receiving the high denomination 2,000-rupee notes.
The sudden move has impacted positively some sectors and negatively some others.
Mutual funds are positive that if money comes in from the unorganized sector to the organized sector and the bank deposit levels go up, then some of the money comes into mutual funds.
The insurance sector will see little impact and for a short duration. In the last five years, especially the private sector insurers have discouraged cash transactions. In fact, cash transactions in this sector are less than 5 percent.
For the pension sector, the move is being looked at as one having a long-term positive impact. Most of the transactions are done through checks. Basically, it will not have a larger impact.
The sudden shock of the currency ban and an unexpected US election result caused markets to open 6 percent down on Nov. 9. But a day later, the story was different and all markets were up.
So, stock markets (BSE and NIFTY) are surging, bond markets happy, but real estate magnates are the ones who will bear the brunt of the new government move. Reason is they have been the recipient of a lot of black money — black money is estimated to be Rs.5 trillion — plus there is huge unaccounted income especially by businessmen and bureaucrats, and enormous money earned through illegal means like drugs, money laundering and hawala transactions. 
By declaring the high denomination bank notes as no more legal tender, the government aims to break the back of those indulging in the illegal transactions. Some jewelers who traded in gold to help black money hoarders since the announcement are now facing the wrath of income tax authorities. 
People in general have welcomed the government move and say that the currency ban is not a sudden one-step action against corruption but part of an overall plan to check graft and the parallel economy.
As a large part of the business is cash-based — especially the traders and small businessmen will see rough days ahead.
"We might have to close down until the situation stabilizes," said Metharam Kriplani, president of the Chambers of Azadpur Fruit and Vegetable Traders.
People in Mumbai said grocers were charging 10 times the price of salt in return for accepting the old cash notes.
India has unearthed Rs.1.25 trillion ($18.51 billion) of undeclared (black money), including 670 billion rupees in the recent income disclosure scheme, since his government came to power in 2014, Modi said. 
Eijaz Ahmed Khan, a Saudi resident of 35 years, told Arab News: “I have feedback from family back in India. Everybody is in panic in India. I am living here, but my sons are studying in India. Somehow they managed to change the banned currencies immediately after the announcement.”
Indian news channels and social media have been airing the plight of the common man in wake of the banned currencies.
The government should have given at least three months notice before banning the currency notes, a section of the people said, adding that those with black money seem to be least affected because they can convert black money into dollar, euro, gold and some other assets. 
A long time resident of Jeddah, Kumar Krishnan, said the decision has created trouble for poor people.
There are rumors that the currency news was known for some people months back. The people holding black money must have changed before the announcement.
In the long run, the move should help the economy, he said, adding that it would have been better if the government had brought illegal Indian money stacked abroad.
Reacting on Indian government’s decision, Herman Lewis, based in Dubai, said: “I feel it is a good move. There was a parallel economy running in India, which is not good for any economy. Initially, people have to go through some hardships but later results will be good. With this decision, larger percentage of black money will come out. People will pay taxes.”
“In India, black money is with politicians, religious organizations and builders. The Indian decision will help the economy. Prices will come down. We don’t know the exact motive but definitely it is a good move. It will help the country so it will help people in India,” he added.
Indian businessman Ismail Mohammed, owner of Sana Fashion, based in Dubai for nearly 50 years, told Arab News the government’s decision is dicey.
“The poor are suffering. Those who are having black money are relaxing. Why should billion people suffer. The government’s move is not likely to help the economy. People having black money in India have avenues to convert into legal money.”

Source: Arab News