Rs 500, Rs 1,000 ban: ‘Indian jugaad’ blooms to help black money hoarders


New Delhi, While the din of Diwali crackers was yet to settle down, announcement of demonetization, freezing 86% of Indian currency in circulation by value, has worked like a laser strike. It did not make a sound but landed on its targets.

Effect, however, appears to be mixed. While fake currency took a lethal hit same cannot be said about the black money. Black money-related transactions appear to have been a late night Diwali gift to some and dawn of new business opportunities for others.

One of the indicators of the late night bounty on Tuesday, 8th November 2016, was the rise in price of gold. Gold prices soared by more than 5 percent on Tuesday during European hours. In local markets price of 10 gm of gold rose from Rs 30,000 to Rs 34,000 on Tuesday night and has since risen up to Rs 50,000 in certain areas.While the initial rise in international markets might have been due to victory of Donald Trump in the US elections, local increase has certainly been due to late night demand on Tuesday, 8 November 2016.

Modus operandi is simple. Old currency notes of Rs 500 and Rs 1,000 are taken by the jewelers. Proper receipts of money received are maintained of dates of 8 November or prior to it. For purchases below Rs 2 lakhs there is no need of PAN card and hence no traceability. Multiple receipts with amounts less than Rs 2 lakhs are easily made. Jewelers will deposit this money in the banks in regular manner until 30 December 2016 or also until March 2017 with special reasons. For an odd chance of scrutiny, they have all the paper work.

While gold transactions, besides helping the jewelers, at least are getting the black money out of the hands of the hoarders and putting them in banking channels, same is not true of newly mushroomed money changers.

These money-changers are using army of below poverty line persons to operate their Jan Dhan Yojana accounts. Deposits of old currency below Rs 2.5 lakhs will get made using old currency notes. These money-changers are offering to provide the money back by around December 2016 and in some cases in March 2017.

As per local information money changing rates started at around 10 percent and have been increasing daily touching as high as 30 to 40 percent. This business operation ensures conversion of black money in older denominations to new black money with new Rs 500, Rs 2,000 and old Rs 100 notes.