Demonetisation

Demonetisation

Subject : Economy

Context:

The Supreme Court said that it will have to examine the 2016 demonetisation decision to come to a conclusion whether the issue has become a mere “academic” exercise.

Concept:

Demonetisation:

• It is the act of stripping a currency unit of its status as legal tender.
• It occurs whenever there is a change of national currency and the current form or forms of money is pulled from circulation and retired, often to be replaced with new notes or coins.
  • Currency with Public: As per the Reserve Bank of India (RBI) definition, currency with public is arrived at after deducting cash with banks from total currency in circulation.
  • Currency in Circulation: It refers to cash or currency within a country that is physically used to conduct transactions between consumers and businesses
• High Denomination Bank Notes (Demonetisation) Act 1978 –
  • It highlights the need for demonetisation of high denominations, in the public interest.
  • The usage of high-denomination bank notes was considered detrimental to the Economy of India, due to illegal financial transactions facilitated by high-denomination bank notes.