The announcement about demonetising Rs.500 and Rs.1,000 currency notes took the nation by surprise. It caused not only panic among the citizens but also led to many rumours. The primary reason is eradicating black money from the market. But those with white money are also feeling the effects.

Impact on the Aam Aadmi

  • The ban on Rs 500 and Rs 1,000 notes will lead to a shortage of other denominations as well. Banks, retail outlets, transport services, grocery stores, and most other services are likely to face the shortage.
  • If you are self-employed or own a small business, you may not be able to pay salaries to your employees.
  • Cash transactions with your vendors and customers may face delays.
  • If you own or work for an organisation that depends on cash transactions only, there could be huge disruption.
  • Your employer will soon face a cash crunch, unless yours is a cash-rich company.
  • Declaring money received as gifts from friends and family would become complicated.
  • Although tax is deducted from your salary, you will now have to declare any extra income.
  • Are your aged parents holding large amounts of cash at home as an emergency fund? If so, depositing this money in their accounts could be tough.

Long-term impact
Around 80% of cash in India is in the form of Rs.500 and Rs.1,000 currency notes. The Reserve Bank of India revealed this during a press conference yesterday. A ban on these denominations would mean a huge shortage of liquid cash. This may lead to deflation at first and then to inflation in the long-term. The value of rupee would appreciate, making things cheaper.
With the sudden and huge deposits in banks, more money could be available for lending. Were you planning to buy a house through a home loan? If so, expect a drop in interest rates. Due to the unavailability of funds, the demand for real estate may drop marginally. This would also have an impact on prices.

Tips to handle the situation better

  • Collect all your Rs 500 and Rs 1,000 notes and visit the nearest bank branch to deposit or exchange the currency.
  • Get the fuel tanks of your vehicles filled.
  • Keep your identity proof handy for all transactions.
  • Plastic money may be a saviour at this time. Use debit or credit cards where possible.
  • Internet banking and online shopping are also good alternatives.
  • Maintain a list of serial numbers of the notes you exchange. This would serve as a record, in case any queries arise in future.

Effect on plastic money and other digital payment methods
Moving towards a cashless economy has received a big nudge after the ban. The shortage of liquid cash may push citizens towards using credit or debit cards, internet banking, and e-wallets. Many online shopping websites allow the use of e-wallets like Paytm to enable easier purchasing. Electronic transfer of funds would save you from standing in long queues at banks to exchange the banned currency. Credit and debit cards will help you to make purchases at retail stores as well as on the internet.


The impact of the ban may be like deconstructing a poorly built building and then re-constructing it in a better way. The end result would be a cashless economy and a black money-free society. So, the temporary inconvenience is a price everyone will have to pay.