Home > Topics > Demonetisation

demonetisation

Demonetisation is an economic term which is used to mean the 'scrapping' of old currency notes and stripping them off their status of legal tender, usually when a new currency note or currency is being introduced in the economy of the country. This is a standard practice followed by all major economies of the world for different reasons. For instance, when the 'Euro' was introduced as the common currency of the European Union, the participating countries had effectively followed a 'demonetization' drive of their respective currencies by fixing exchange rates for the old currency to the newly introduced Euro. Indian Rupee has been demonetized various times as well. The Rs. 10,000 notes were demonetized once in January 1946 and then again in January 1978. Recently, the Rs. 500 and Rs. 1000 notes were demonetized in a surprise move on November 8, 2016.

The recent scrapping of Indian 500 and 1000 rupee currency notes has sent the entire country in a whirlpool of confusion. The country may be happy about the initiative or upset with the move, but the word 'demonetisation' has recently become the trend. We bring to you the basic understanding of what the word means, when and how the demonetization of Indian Currency was brought into effect and why it is good or bad.

What is Demonetisation?

Demonetisation is an economic term which is used to mean the 'scrapping' of old currency notes and stripping off their status of legal tender. There are two basic elements to this definition. One is 'scrapping of old currency notes' and 'status of legal tender'. Before we explain the same, what you need to understand that a currency note or paper currency is essentially a promissory note or a legal document that simply suggests that the payee has 'promised' to pay that amount to the payer. The same is printed on every currency note as well. This is validated by the heads of the Central Banks of the nation and in case of India, by the Governor of Reserve Bank of India. This "status" of legal tender can be scrapped for a currency note, which means that the instrument seizes to be a "legal" mode of monetary transactions and in effect looses the value associated with that instrument. In other words, until and unless the old currency is legally exchanged at the designated centers, they are equivalent to nothing more than scraps of paper.

Demonetization of Indian Rs. 500 and Rs. 1000 Notes (When and How)

In a surprise move, the Indian Prime Minister, Shri Narendra Modi in his address to the nation on November 8, 2016 declared the demonetization of the Indian Rs. 500 and Rs. 1000 currency notes with effect midnight of November 8. This move sent the entire nation in a dizzy. The Hon'ble Prime Minister stated the decision as a step to counter terrorism which was being funded by counterfeit money as well as a decisive strike against the black money being hoarded by the citizens of the country. The decision scrapped the legal tender status of the high value currency notes of INR 500 and 1000 with immediate effect and introduced new Rs. 500 and Rs. 2000 notes. After the address, the Economic Affairs Secretary, Mr. Shaktikanta Das further explained the method and means by which the old currency notes would be exchanged for new notes. It was further assessed that people should not worry about their money as demonetisation does not mean that their money has no value. All it means is that it must be exchanged for the new notes.

As per the notification, barring some public utilities like petrol pumps, hospitals, railways and airports as well as cremation and burial grounds, the use of old 500 and 1000 rupee note was discontinued. All the banks were shut for one day to effectively carry out the exchange of old currency and the ATMs across the nation were closed for two days. The government also imposed a limit of withdrawals from ATMs to Rs. 2000 per card and from banks to Rs. 10,000 per account per day upto Rs. 20,000 withdrawals per week. The limits were later revised to Rs. 2500 ATM withdrawals per day and Rs. 24,000 bank withdrawals per account per week. The use of old currency notes were also extended for use at Delhi Metro recharge counters as well as payment of property taxes and electricity bills. The government intends to exchange the old currency notes by December 30, 2016. After the date, the exchange of the old currency notes would only be possible at designated counters of RBI after submitting a declaration form to the same effect.

The Aftermath of Demonetisation of Indian Currency

The move of the Modi Government received both praises and severe criticisms from every section of the society. The immediate effect of the announcement saw countrymen lining up at the ATMs to withdraw 100 rupee notes to tide over the impending cash crunch. As per figures provided by the RBI, the banned currency constituted 86 percent of the currency in circulation in the country at the time. The entire magnitude of replacing the money in itself is a mammoth task and the pinch was felt by everyone in the immediate aftermath. The banks and ATMs opened to long queues of citizens lined up to exchange, withdraw and deposit the old currency notes. Reports were received from various part of the country about chaos regarding decline in essential services. The government has released further measures and actions and continues to do so in order to make this as convenient to the common man as possible. The Income Tax Department and the Ministry of Finance has further clarified that since it had given affair chance to all to declare their income by September 30 under the voluntary disclosure schemes, no further concessions would be given to people depositing large amounts in their accounts and all such large transactions would attract Tax scrutiny and penalty as per the law. As the drive to exchange the old currency notes continue, measures are being put in place to make the transition as smooth as possible. However, it can be judged that the sheer quantum of the money that needs to be exchanged (given the population and the amonunt of notes already in circulation) makes this a logistical juggernaut and would continue to cause discomfort. The Government and RBI are constantly working towards making this as comfortable as possible. Some of the measures include increasing the limits of withdrawls and scrapping Toll on National Highways till November 18, midnight.

SC Demonetisation Judgment Today LIVE: Top Court To Rule On Validity Of 2016 Note Ban Decision
India.com News Desk | January 2, 2023 9:08 AM IST
SC Demonetisation Judgment LIVE: Stay tuned to this space for all the latest updates on the SC
SC Demonetisation Judgment Today LIVE: Top Court To Rule On Validity Of 2016 Note Ban Decision
indiacom
2023-01-01T22:08:35+00:00
2023-01-01T22:08:54+00:00
Demonetisation
India.com
Demonetisation Valid or Not? Chidambaram Rips Apart The Move During SC Hearing. 10 Points
India.com News Desk | November 24, 2022 1:59 PM IST
Demonetisation: For the unversed, On November 8, 2016, Prime Minister Narendra Modi announced that
Demonetisation Valid or Not? Chidambaram Rips Apart The Move During SC Hearing. 10 Points
indiacom
2022-11-24T02:59:56+00:00
2022-11-24T04:28:24+00:00
Demonetisation
India.com
PM Kisan Samman Nidhi: When Will 13th Installment Be Released, Beneficiary List, eKYC Details Here
Analiza Pathak | November 12, 2022 7:59 AM IST
Here are all the details concerning the PM Kisan 13th Installment Date 2022, steps to use for the
PM Kisan Samman Nidhi: When Will 13th Installment Be Released, Beneficiary List, eKYC Details Here
indiacom
2022-11-11T20:59:13+00:00
2022-11-11T20:59:13+00:00
Demonetisation
India.com
Supreme Court To Hear Plea Challenging Constitutional Validity Of Demonetisation On October 12
India.com News Desk | September 28, 2022 7:39 AM IST
Supreme Court to hear plea challenging constitutional validity of the central government's 2016
Supreme Court To Hear Plea Challenging Constitutional Validity Of Demonetisation On October 12
indiacom
2022-09-27T20:39:33+00:00
2022-09-28T00:21:39+00:00
Demonetisation
India.com
Five Judge Supreme Court Constitution Bench To Hear Petitions Against Demonetisation On Wednesday
India.com Business Desk | September 27, 2022 8:47 PM IST
Petitions challenging the Centre's decision to demonetise currency notes of Rs 500 and Rs 1,000 in
Five Judge Supreme Court Constitution Bench To Hear Petitions Against Demonetisation On Wednesday
indiacom
2022-09-27T09:47:08+00:00
2022-09-27T09:47:08+00:00
Demonetisation
India.com
Trinamool MP Does Something ‘Unusual’ In Lok Sabha To Highlight LPG Price Hike
India.com News Desk | August 1, 2022 8:01 PM IST
Sometimes, our lawmakers in the assemblies and the parliament indulge in antics to draw the
Trinamool MP Does Something ‘Unusual’ In Lok Sabha To Highlight LPG Price Hike
indiacom
2022-08-01T09:01:12+00:00
2022-08-01T09:01:12+00:00
Demonetisation
India.com
Fake Rs 500 Notes In Circulation Up By Over 197 Times In 5 Last Years
India.com Business Desk | March 16, 2022 12:41 PM IST
Counterfeit Currency: 8,34,947 fake counterfeit notes were seized by the government in 2020. In
Fake Rs 500 Notes In Circulation Up By Over 197 Times In 5 Last Years
indiacom
2022-03-16T01:41:42+00:00
2022-03-16T01:41:42+00:00
Demonetisation
India.com
Unaware of Demonetisation, Visually Challenged Beggar Seeks Exchange of RS 65,000 Life Savings
IANS | October 21, 2021 8:44 AM IST
The visually impaired person requested the collector to replace his Rs 65000 savings with new
Unaware of Demonetisation, Visually Challenged Beggar Seeks Exchange of RS 65,000 Life Savings
indiacom
2021-10-20T21:44:44+00:00
2021-10-20T21:44:44+00:00
Demonetisation
India.com
Rs 10 Lakhs Cash Including Demonetised Notes Recovered from Deceased Beggar's Home in Tirumala
IANS | May 17, 2021 11:52 PM IST
The currency notes, including the now demonetised Rs 1,000 notes, totalled to around Rs 10 lakh.
Rs 10 Lakhs Cash Including Demonetised Notes Recovered from Deceased Beggar's Home in Tirumala
indiacom
2021-05-17T12:52:27+00:00
2021-05-17T12:52:27+00:00
Demonetisation
India.com
Rs 2,000 Notes Not Printed in Last 2 Years! Here's What Govt Said About The Rs 2,000 Currency Notes
India.com News Desk | March 15, 2021 6:22 PM IST
The move is seen as an attempt to prevent hoarding of the high-value currency and thus, curb black
Rs 2,000 Notes Not Printed in Last 2 Years! Here's What Govt Said About The Rs 2,000 Currency Notes
indiacom
2021-03-15T07:22:04+00:00
2021-03-15T07:23:21+00:00
Demonetisation
India.com
ED Attaches Rs 130 Crore Assets of Hyderabad-based Musaddilal Jewellers & Others in Demonetisation Case
PTI | February 2, 2021 12:37 PM IST
The action has been taken against Musaddilal Gems and Jewels Pvt Ltd, Vaishnavi Bullion Pvt Ltd and
ED Attaches Rs 130 Crore Assets of Hyderabad-based Musaddilal Jewellers & Others in Demonetisation Case
indiacom
2021-02-02T01:37:00+00:00
2021-02-02T01:37:00+00:00
Demonetisation
India.com
Four Years of Demonetisation: PM Modi Hails Transparency, Congress Calls it 'National Tragedy'
India.com News Desk | November 8, 2020 6:38 PM IST
The action has been taken against Musaddilal Gems and Jewels Pvt Ltd, Vaishnavi Bullion Pvt Ltd and
Four Years of Demonetisation: PM Modi Hails Transparency, Congress Calls it 'National Tragedy'
indiacom
2020-11-08T07:38:08+00:00
2020-11-08T07:38:08+00:00
Demonetisation
India.com
Yes Bank: Chidambaram Links Crisis With Note Ban, Raises 5 Questions
India.com News Desk | March 7, 2020 6:00 PM IST
P Chidambaram said that SBI spending money to buy 'worthless' shares of Yes Bank is a bizarre idea.
Yes Bank: Chidambaram Links Crisis With Note Ban, Raises 5 Questions
indiacom
2020-03-07T07:00:37+00:00
2020-03-07T12:34:57+00:00
Demonetisation
India.com
Chidambaram Blames Centre, Says Country Heading Towards ‘Limping Economy’
India.com News Desk | February 5, 2020 3:53 PM IST
Congress leader P Chidambaram stated that the Central government should have given the explanation
Chidambaram Blames Centre, Says Country Heading Towards ‘Limping Economy’
indiacom
2020-02-05T04:53:01+00:00
2020-02-05T04:53:25+00:00
Demonetisation
India.com
Rahul Gandhi Targets Centre, Calls India 'Rape Capital of World’ Again at Rally in Jaipur
India.com News Desk | January 28, 2020 5:21 PM IST
While addressing the 'Yuva Aakrosh' rally in Jaipur, Rahul Gandhi spoke on the issue of
Rahul Gandhi Targets Centre, Calls India 'Rape Capital of World’ Again at Rally in Jaipur
indiacom
2020-01-28T06:21:57+00:00
2020-01-28T06:21:57+00:00
Demonetisation
India.com
Citizenship Amendment Act: Rahul Gandhi Likens CAA to Demonetisation, Calls it 'Notebandi Number 2'
India.com News Desk | December 28, 2019 12:39 PM IST
"This sham (Citizenship Amended Act and NRC) is notebandi (noteban) number 2", said Rahul Gandhi.
Citizenship Amendment Act: Rahul Gandhi Likens CAA to Demonetisation, Calls it 'Notebandi Number 2'
indiacom
2019-12-28T01:39:08+00:00
2019-12-28T01:45:08+00:00
Demonetisation
India.com
Fact Check: No, RBI is Not Issuing New Notes And Coins of Different Denominations
India.com News Desk | December 13, 2019 3:24 PM IST
A simple check of the RBI's official website shows that the aforementioned claim is false. This is
Fact Check: No, RBI is Not Issuing New Notes And Coins of Different Denominations
indiacom
2019-12-13T04:24:55+00:00
2019-12-13T04:25:12+00:00
Demonetisation
India.com
Another Demonetisation? Rumours Scare Small Firms Which Are Refusing Rs 2,000 Notes
India.com Business Desk | December 8, 2019 10:49 AM IST
However, it's just a rumour which has been triggered by the recent comment of former Economic
Another Demonetisation? Rumours Scare Small Firms Which Are Refusing Rs 2,000 Notes
indiacom
2019-12-07T23:49:12+00:00
2019-12-07T23:53:23+00:00
Demonetisation
India.com
'Demonetisation Disaster, Note Bandi Se Mandi Tak', Opposition Targets Centre on 3rd Anniversary of Note Ban
India.com News Desk | November 8, 2019 11:35 AM IST
Three years back, on November 8, 2016, Modi, in a televised address had announced that Rs 500 and
'Demonetisation Disaster, Note Bandi Se Mandi Tak', Opposition Targets Centre on 3rd Anniversary of Note Ban
indiacom
2019-11-08T00:35:31+00:00
2019-11-08T02:44:56+00:00
Demonetisation
India.com
Rs 2,000 Notes Can be Demonetized Without Disruption: Ex-DEA Secretary Garg
IANS | November 8, 2019 12:33 AM IST
According to news agency IANS, Garg said, "A good chunk of Rs 2,000 notes are actually not in
Rs 2,000 Notes Can be Demonetized Without Disruption: Ex-DEA Secretary Garg
indiacom
2019-11-07T13:33:02+00:00
2019-11-07T13:33:02+00:00
Demonetisation
India.com