Demonetization-Challenges for Rural India

Abstract

Demonetization is the act of stripping a currency unit of its status as legal tender. When any Government withdraws the legal tender rights of any denomination of currency, it is known as demonetization. The Prime Minister announced on 8th of November, 2016 about the withdrawal of legal tender of ` 500 and ` 1000 currency note in the late evening. The government claimed that this demonetization is required for the following reasons- 1. For stopping the funding of terrorism. 2. For facing the problem of fake Currency. 3. For making the black money worthless. 4. For reducing the corruption, etc. In terms of value, the annual report of Reserve Bank of India (RBI) of 31 March 2016 stated that total bank notes in circulation valued to 16.42 lakh crore of ` 500 and ` 1000 banknotes. As per the press release of RBI dated on 28/11/2016, the total amount of old notes (which are now withdrawn) of value of ` 8.11 lakh crore has been deposited by the customers till 27/11/2016. Banks started accepting deposits from 10th of November but within a period of 18 days around half money has been received by the banks. The show is still on. But, between this the Government again provided the scheme of pay tax and converts your black money into white money scheme launched. Is there any need for it?