Explain meaning of Mumbai scams

While reading about Mumbai on wikitravel, before my next business trip, I have found information about two scams, said to be popular in this city (or entire India?), which either lacks details or is completely not understandable by me. I will appreciate any help in explaining them.

First, in "To and from airport" section:

There is a well-known scam with the employees here replacing your 500 rupee bill with a 100 rupee bill and giving you change for the latter.

Either I'm dumb, or I don't follow it. If employee is replacing my 500 rupee bill with 100 rupee bill and then he is giving me a change for the rest, then where seems to be the scam here?

Then, in "Stay safe" section there's a note:

There is a scam, in which a persons asks you for a change of 1000 INR currency note. Once you give him two 500 INR notes he changes these notes to two 100 INR without you noticing and thus demands 800 INR more from you. Beware when someone asks you change for 1000 INR.

Now, this is something, that I completely don't understand. In details:

when someone asks for a change for 1000 INR bill, then why should I handle him 2500 INR?
even if I give him 2500 INR bill, which he replace with 2100 INR bill (is there such bill anyway), then how can he ask for "missing" 800 INR, if 2500-2100 = 400 INR?

Best Answer

The 500 and 100 Indian rupees bills are almost identical in size and also looks somewhat similar.

So to answer your first question, when you pay someone with INR 500 bill for some service/good, the person might trick you by saying that you paid him/her just INR 100 and return you the change. Suppose one item costs INR 70 and you paid the vendor INR 500 for the item. So now the vendor might say that you paid just INR 100 and will give you a change of INR 30 instead of INR 430.

For the second question, "2 500 INR notes" means two 500 INR notes. There is no Indian rupee bill of denomination 2500. Only up-to 1000 INR notes are available. So the situation is similar to first one. As here also one might trick you by replacing INR 500 notes with INR 100 notes.