The government banned Rs 500 and Rs 1000 notes in a surprise move on Tuesday.
Highlights
- Tax officials search locations in Delhi, Mumbai, Ludhiana, Chandigarh
- Jewellers, hawala operators, currency exchange operators targeted
- Rs 500 and Rs 1,000 notes banned, need to be deposited in banks
Tax officials are conducting large and simultaneous raids in four different cities including Delhi and Mumbai to find people hoarding large amounts of the 500 and 1,000 rupee notes that can no longer be used for transactions.
Jewellers, money-launderers or
hawala dealers and those who privately handle currency exchange are being targeted in Ludhiana and Chandigarh along with the capital and the financial capital.
On Tuesday, in a shock move, Prime Minister Narendra Modi said in a special televised speech that the high-denomination notes were being abolished to
crack down on black money and money-laundering and fake or counterfeit currency.
The PM made his speech at 8 pm and said the old notes would be pulled from circulation by midnight. Sources say that intelligence agencies detected a spike or surge in
hawala transactions - the illicit routing of undeclared and untaxed money into legit money or assets.
The government has also been monitoring high-value sales including luxury cars, property and travel to detect black money being spent in a rush to beat the new law.
Bank
deposits of more than 2.5 lakhs will be scrutinised and matched with the income declared by the account holder and in case of a mismatch, extra taxes and a 200 per cent penalty will be imposed, the government has said.
Queues formed on Friday as banks reopened after a one-day holiday and people tried to swap their old notes for smaller bills and for new 500 and 2,000 rupee notes, which are being rushed into circulation and are designed to be harder to forge.
Most experts, industry leaders and also several opposition parties have praised the government's demonetisation move.
"I assure you the Govt is unwavering in its effort to create an India that is corruption free & fruits of development touch every citizen, (sic)" PM Modi tweeted today, thanking citizens for "such warmth, enthusiasm & the patience to bear limited inconvenience for a greater good."
The government anticipates a fall in consumption initially, especially in cash-heavy sectors such as jewellery, restaurants and transport, but expects it to pick up in a couple of months.
There was about 8.4 lakh crore in 500 and 1000 rupee notes in circulation and the government expects bank deposits to go up by about 4 lakh crores. With banks flush with cash through the higher deposits, say experts, they could lower interest rates, which will mean lower EMIs on loans.