With the announcement of demonetization of high denominated currency notes by the Prime Minister on 8th November, 2016, the banned currency had just one way to go which was deposit in banks.
With the progress of deposit of money in the banks, it is evident that most of the demonetized currency is likely to find its way back to the bank. Although, let there be no mistake in understanding that money deposited is not equal to white money but it is also clear that the hoarders of black money have taken the route of depositing small money in a number of accounts belonging to the poor. The intention is to force the account holder to withdraw the new currency and thus the hoarders will get their cash back. The outcome of various raids carried out by tax authorities has revealed that the big time defaulters have managed to convert their cash. If the hoarders are able to have their way, Government will not be able to achieve their objective of eradicating the black money.
Then what can the government do?? In my opinion they should do the following:
Put a restriction on holding cash in hand by households and the business entities like the limits they have introduced on personal gold.
Fixing a lower limit on the cash transactions.
After implementing the above two provisions, Government should once again demonetize the high denominated currency recently introduced and can even gradually change the lower denominated notes.