Demonetisation of Rs. 500 and Rs. 1000 notes

From midnight of November 8, 2016, Rs. 500 and Rs.1000 will cease to be legal tender. "These notes are just papers from tomorrow," says the prime minister.

Taking the nation by surprise, Prime Minister Narendra Modi on Tuesday night announced demonetization of Rs. 1000 and Rs. 500 notes with effect from midnight, making these notes invalid in a major assault on black money fake currency and corruption.

In his first televised address to the nation, Mr. Modi said people holding notes of Rs. 500 and Rs. 1000 can deposit the same in their bank and post office accounts from November 10 till December 30

An interesting side effect here of India's demonetization plan. As we know, the Rs 500 and Rs 1,000 notes have been cancelled as legal tender, to be replaced by other notes and designs. There are limits on how much cash can be changed for cash (Rs 4,000, soon to fall to 2,000) but no limits upon what can be deposited in bank accounts. Of course, large deposits are going to be subject to tax scrutiny, rather the point of the exercise in fact. But what is interesting is that the flood of cash being deposited is such that it's actually bringing interest rates down. This is an interesting and welcome macroeconomic effect:

State Bank of India (SBI) reduced rates on deposits from one year to 455 days to 6.90%, down 15 basis points, while keeping the 7% rate for deposits between 211 days to one year unchanged. That may not be great news for those putting their money in banks but lending rates are likely to follow suit in a few weeks, possibly giving sluggish credit expansion a much-needed boost and shoring up growth. A basis point is 0.01
percentage point.

"All rates will fall," said SBI Chairman Arundhati Bhattacharya. "The bank has seen huge inflow of deposits but demand for credit has slowed down. Therefore, lending rates too will fall but after a gap."

the new notes are:This is the new 500 rupee note

This is the new 2000 rupee note

thank you