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3. MEANING AND CONCEPT
Demonetization is an economic process in which a
country’s currency unit is no longer legal tender. A
currency unit is what we would commonly refer to as
physical money, such as banknotes and coins. When
demonetization occurs, the country’s currency unit is
essentially worthless, as it can no longer be used to
purchase goods and services.
Demonetization can occur for several reasons,
from a change in national currency to the
retirement of older forms of money

4. Demonetization In India
• On November 8, 2016, led by PM Narendra
Modi, the government of India announced the
withdrawal of 1000- and 500-rupee notes from
circulation. The government also announced
the issuance of new 500- and 2000-rupee notes
in exchange for the demonetized notes.

5. HISTORY OF DEMONITISATION IN
INDIA
The 2016 Demonetization was the largest one of
its kind in India, but it was not the first.
• In 1946, the Reserve Bank of India
demonetized 1000- and 10000-rupee notes, as
these were under-circulated at that time.
• In 1978, under PM Morarji Desai, the
government demonetized 1000, 5000, and
10000 rupee notes in order to curb the menace
of black money.

6. REASONS
• To tackle the menace of black money/parallel
economy/shadow economy
• To counter the menace of counterfeit currency
• To prevent the cash being used for terrorist
activities/terror funding
• Governments may choose to undergo
demonetization if the currency gets out of
control, due to problems like hyperinflation.

7. OBJECTIVES
• 1. To stop the circulation of black money in the
market.
• 2. To help in reducing the interest rates of the
prevalent banking system
• 3. To help in creation of cashless economy
• 4. To formalize the informal Indian Economy.
• 5. To remove counterfeit notes from the
market.
• 6. To help reduce anti-social activities and their
finances

8. Advantages
• Reduces various criminal activities
• Increase in Tax Collection
• Promotes a cashless economy
• Reduced liability for the Government
• Increased GDP levels
• Black Money tracking
• Improved deposits and savings in
financial institutions

9. Disadvantages
• Incurs costs from printing new banknotes
and minting of coins
• Can trigger chaos among citizens
• May not entirely reduce criminal activity
• Little cash in circulation
• Slowdown in Economic Growth
• Problems with paying bills

10. DEMONTIZATION AFFECTING THE
POOR
• Market vendors had to shut down their shops
• The ban of the 500 and 1,000 rupee bills has
tremendously affected migrant labor workers
• Demonetization has also negatively impacted
small business owners who serve food on
streets
• The low-income, working class people suffer
from the new policy
• Demonetization in India has also negatively
affected daily-wage workers

11. SCHOOL OF BUSINESS
AND MANAGEMENT
INTERNATIONAL BANKING AND
FINANCIAL SERVICE
Naveen Singh
Bcom Honors
1st year (EAFM)