Demonetization is the act of stripping a currency unit of its status as legal tender, requiring a change in national currency. The Indian government recently demonetized Rs. 500 and Rs. 1000 currency notes to tackle black money, lower cash circulation related to corruption, counter fake currency used for terrorism funding, and scoop out over Rs. 5 lakh crore of black money from the economy. While demonetization aims to curb illegal activities funded by black money, it also causes short-term hardship for citizens and shortages in banks and ATMs during the currency exchange period.

1. Prepared by :-
Rajat and Shubham
Kasturi Ram College Of Higher Education

2. Meaning of Demonetization
Demonetization is the act of stripping a currency unit
of its status as legal tender and is necessary whenever
there is a change of national currency.
The old unit of currency unit must be retired and
replaced with a new currency unit.

3. REASONS
 To tackle black money in economy.
 Lower cash circulation in the country which “ is directly
related to corruption in our country”.
 Counterfeit the money used for funding of terrorism.
The move is estimated to scoop out more than Rs.5 lakh crore
black money from our economy.

4. Glimpse Of Sectors affected
by demonetization
 AUTO
 TELECOM
 BANKING

5. History
 The move to demonetize currency notes is not new. Rs1000
and higher denomination notes were first demonetized in
January 1946.
DEMONETIZED/
RE-ISSUED/NEW
DENOMINATION
YEAR MONTH CURRENCY NOTES
Demonetized 1946 January Rs.1000,5000,10000
Re-issued 1954 ---------- Rs.1000,5000,10000
Demonetized 1978 January Rs.1000,5000,10000
New denomination 1987 October Rs.500
Re-issued 2000 November Rs.1000

6. Merits of Demonetization
 The biggest merit of demonetization is that it helps the
government to track people who are having large sums of
unaccounted cash or cash on which no income tax has been
paid when demonetization happens all that cash is of no value
and such people have two options one is to deposit the money
in bank accounts and pay taxes on such amount and second
option is to let the value of that cash reduced to zero.

7.  Since black money is used for illegal activities like
terrorism funding, gambling, money laundering and also
inflating the price of major assets class . Hence in this way
it helps in putting an end to this circle of people doing
illegal activities to earn black money.
 Another benefit is that people are disclosing their income
by depositing money in their bank accounts due to which
government gets a good amount of tax revenue which can
be used by the government towards the betterment of
society by providing good infrastructure, hospitals,
educational institutions, roads and many facilities for poor
and needy sections of society.

8. Demerits of Demonetization
 The demerit of demonetization is that once people in the
country gets to know about it than first for few days there is
frenzy among public as everybody wants to get rid of
demonetized currency notes which in turn sometimes can lead to
law and order problem and disordered situation especially in
banks and ATMs which are the only medium to change the old
currency units to new currency units.
 Another demerit is that destruction of old currency units and
printing of new currency units involve costs which has to be
borne by the government and if the costs are higher than benefits
then it will become less helpful.

9.  Another problem is that majority of times this move is
targeted towards black money but if people have not kept
cash as their black money and rotated or used that money
in other asset classes like real estate, gold and so on then
there is no guarantee that demonetization will help in
catching corrupt people.

10. SUGGESTION
 Limit on cash withdrawal should be removed so that the flow
of cash increases and leads to reduction of queue’s.
 Workshops and seminars should be organized for people of
rural areas who are not aware of net banking system.
 Illiterate people should be given education about the use of
debit and credit cards.
 More branches of banks should be opened in rural areas
where there is no banking facility.
 Zero balance bank account should also be opened in
private banks so that it can attract low income group or
people of rural areas.

11.  A different tribunal authority should be setup which will
deal only cases of net banking frauds and online payment
frauds.
 Discounts should be provided for payment through debit
cards, credit cards against cash payment which will attract
huge amount of people.
 Incentives should be provided on the usage of swipe
machines by dealers.

12. CONCLUSION
Central government’s decision to demonetize the high value
currency notes is one the major steps towards the eradication of
black money in India. The demonetization drive will affect some
extent to the general public, but for larger interest of the country
such decisions are inevitable. Also it may not curb black money
fully, but definitely it has major impact in curbing black money to
an large extent as Jan dhan accounts have seen a sharp rise in
deposits and people who provide funding for terrorism by fake
currency notes feel their backbone completely broken. So this move
will not only help in curbing black money from India’s economy but
it will also help in depletion of terror activities up to an great extent
and will help to maintain law, order and especially ‘peace’ in
Kashmir which is most popular place for terror activities. People are
facing some problems due to demonetization but it is pain for our
better time only so we should support method of cashless economy
for better future of Indian economy.