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Are the existing Rs.500 and Rs.1000 banknotes completely worthless?

Unless you are a Big Boss Season 10 contestant, it is (almost) impossible that you are unaware of Prime Minister Shri Narendra Modi's momentous announcement that...
... All the banknotes of denomination Rs.500 and Rs.1000, currently in circulation, are abolished and scrapped effective from Nov 9, 2016.

This is indeed a historic moment in India's "financial" history.

However, contrary to many articles and comments floating around, these banknotes are NOT worthless. Of course, it depends on one simple aspect... honesty.

If the Rs.500 and Rs.1000 notes in your pocket are honestly earned and tax-paid, they continue to be as valuable as before. Because, you can exchange them — at zero cost — for the same value. As Shri Modi clearly mentioned in his address to the nation "Your money will remain yours. You need have no worry on this point."

It is as simple as exchanging any other item, that you often do at your local store or mall.

But, if these were earned through illegal means or you did not pay your due taxes, then surely they are as good as toilet paper.

Naturally, you don't expect to exchange a stolen item.

Given the mammoth task of replacing all the old currency notes with the new ones and for all the people, there are bound to be challenges and inconveniences. But, I am sure you won't crib about it. After all, this step is good for India. Think of all the jawaans who are willing to die for the nation. This is the least we can do for our nation and ourselves.

Remember, the twin objectives behind this radical move are
a) To eliminate all the black money accumulated in the system, and
b) To make it difficult for terrorists and drug dealers to use fake counterfeit money for financing their activities.   

As per the notification issued by the Ministry of Finance on 8th Nov 2016, here's how we can ensure a smooth transition from the old to the new banknotes.

One. You can exchange all the scrapped Rs.500 and Rs.1000 banknotes at any Issue Office of the Reserve Bank of India or any branch of public sector banks, private sector banks, foreign banks, Regional Rural Banks, Urban Cooperative Banks and State Cooperative Banks.

Two. This can be done any time up to the 30th of December, 2016.

Three. Up to Rs.4000 would be exchanged for the existing legal notes of Rs.100, Rs.50 etc. or the new notes of Rs.500 and Rs.2000. For this you need to fill up the usual requisition slip and show your proof of identity.

Four. This limit of Rs.4000 would be reviewed after 15 days.

Five. However, if you have a KYC compliant bank account, there is absolutely no limit to the amount you can deposit. The full value of the same will be credited to your account.

Six. If the amount is deposited at your home branch / bank, nothing additional needs to be done for crediting your account. But if you deposit the amount at any other bank, you will have to furnish your proof of identity and follow the normal banking procedure.

Seven. For non-KYC compliant accounts, there is limit of Rs.50,000 on such deposits.

Eight. You can even deposit the money for the credit to third party accounts. This would, however, require an authorization from such third party; plus, of course, your ID proof. And the normal banking procedures would apply.

Nine. Over-the-counter cash withdrawal from your accounts is restricted to Rs.10,000 per day, subject to a maximum of Rs.20,000 per week. This limit is valid till Nov 24, 2016 and will be reviewed thereafter.

Ten. ATM cash withdrawal is restricted to Rs.2,000 per day till Nov 18, 2016. Thereafter, the limit would be increased to Rs.4,000 per day.

Eleven. There are no restrictions on non-cash transactions such as cheques, demand drafts, credit or debit cards, mobile wallets, electronic fund transfer, etc.

Twelve. If someone is unable to meet the deadline of Dec 30, 2016 to exchange his/her banknotes, s/he shall be given another opportunity to do so at the specified branches of the RBI.

New Notes of Rs.500 and Rs.2000

At present new notes of Rs.500 and Rs.2000 are being introduced. Going forward, new notes of denominations Rs.1000, Rs.100, Rs.50, Rs.20 and Rs.10 would also be introduced.

The new notes of Rs.500 are different from the earlier banknotes of Rs.500 denomination in colour, size, theme, location of security features and design elements.

New note of Rs.500 is totally different from the earlier Rs.500 banknote.

Features on the new Rs.500 note in the Mahatma Gandhi (New) Series include:
- Size is 66mm x 150mm
- Stone Grey colour
- Red Fort-an image of Indian heritage site with Indian flag on the reverse
- Inset letter ‘E’ in both the number panels
- Bears the signature of Dr. Urjit R. Patel Governor, Reserve Bank of India
- Year of printing '2016’
- Swachh Bharat Logo printed on the reverse
- Intaglio printing of Mahatma Gandhi portrait
- Ashoka Pillar emblem
- Bleed lines
- Circle with ₹ 500 in the right
- Identification mark to enable the visually impaired person to identify the denomination

In addition, banknotes of Rs.2000 have been introduced for the first time.

Specimen of the new Rs.2000 currency note introduced by the RBI.

Issued in the Mahatma Gandhi (New) Series, these come with many features such as: 
- Motif of Mangalayan on the reverse
- Base colour of the note is magenta
- Bears signature of Dr. Urjit R. Patel, Governor, Reserve Bank of India
Inset letter ‘R’ in both the number panels
- Year of printing '2016' printed on the reverse
- In addition, the note has many numerous designs, geometric patterns aligning with the overall colour scheme and other features, both at the obverse and reverse. For details see RBI Notification Issue of Rs.2000 Banknotes.

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