On 8th November 2016, PM Narendra Modi announced the demonetization of rupees 500 and 1000. He said “Notes of rupees 500 and rupees 1000 will not be legal tender midnight. And from 9th November 2016, these notes will be just a piece of paper, totally worthless. Though in last 5-6 months we all heard and experienced it in daily life we don’t know what exactly demonetisation is or what is the meaning of it. Here in this post, we will clear all these basic facts.
As per Investopedia, “Demonetization is an act of stripping a currency unit of its status as legal tender”. Now, what’s legal tender means, again as per Investopedia, “Legal tender is any official medium of payment recognised by law that can be used to extinguish a public or private debt, or meet a financial obligation”. In simpler words, after demonetization of 500 and 1000 rupee notes one cannot use it under law (legally) for financial transactions. You cannot buy any goods or service with it.
Generally, it is done to pull off or retire the old currency from the market and replace with new ones or with completely new notes/currency. In Indian perspective, we can see all these three scenarios; 1000 notes were retired, 500 were replaced with a new design and brand new notes of 200 brought to market.
Like currency notes, even coins can be demonetized. Do you see 5,10,25 paisa or older aanas anymore in the market, can you buy anything with it in the market? The answer is “No”, Why? You cannot use these old coins because those are demonetized.
There is talk about gold demonization in India, but I am not sure at this point how and when it will be done.
Reasons for Demonetisation of Currency
- To fight corruption and crime (money laundering, tax evasion, bribery)
- To combat inflation
- To eradicate counterfeit (fake) currency
- To encourage cashless or less cash economy
- To stop terrorist funding which is generally done with black money
Effects of Demonetization in India
Yes, it affected whole India, each person rich or poor. We can see two types of effect short term and long term.
We saw panic in society, there was no money in ATMs, the bank gave only minimal cash and for that to one need to stand in long line for hours. We saw huge politics over the issue. New channels were constantly debating over the topic all day long. (remember 9:00 PM Primetime). People who had stashed money bought lands and gold. In short, each and every business sector and people from all walks of life affected by it. We will be writing a series of articles on the impact of demonetisation on the various business sector. We will provide information here shortly.
Definition or Meaning of Demonetization in Indian languages
It is also called as “Notebandi/नोटबंदी” in various Indian languages like Hindi, Marathi, Odiya, Punjabi etc. Actually, it is a more common word in India than demonetization. The real meaning of it will be “Vimudrikaran/विमुद्रीकरण“.
विमुद्रीकरण एक प्रक्रिया हैं जिसमे मुद्रा का क़ानूनी दर्जा निकाला जाता है, और ये सिक्कोंके लिए भी लागू होता है| पुराने नोटों या सिक्कोंके बदले नये नोट या सिक्के बाज़ार मे लाएँ जाते हैं| जैसे भारत मैं ५०० के नये नोट आये| और कभी कभी बिलकुल नये नोट जैसे २००० के नोट भी शुरू किए जातें हैं|
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The government of India, under Digital India campaign promoting Faceless, Cashless and Paperless – Next Generation Services, do read about it.
We would like to know the translation and definition of it in Telugu, Tamil, Kannada, Malayalam, Urdu, Bangla, Punjabi and other regional languages. You can comment it in the comment box below.