India is progressing towards Demonetisation

India is progressing towards Demonetisation pardesi news 1479876687

On 8th November, the Indian Union Government has announced that Rs. 500, Rs. 1,000 notes will cease to be legal tender. It was announced by Prime Minister Narendra Modi in a surprise address to nation. The demonetisation drive of these two currency units was taken to root out the menace of black money, corruption and fake currency from the country. The currency notes of 100, 50, 20, 10, 5, 2 and 1 rupee will remain unaffected by this decision and remain legal tender. There will no restrictions of any kind on non-cash payments by cheques, demand drafts, debit or credit cards and electronic fund transfer.

 Following the announcement, the Reserve Bank of India (RBI) has issued new series of notes for 500 rupees and 2,000 rupees denomination with improved features and newer sizes. Both the designs of 500 rupees and 2,000 rupees notes is very friendly towards the visually-impaired by having features which make it accessible for all sections.  It will be for the first time 2,000 rupees note denomination has been issued. It will be called as the ‘Mahatma Gandhi (New) Series’. The base colour of the note is magenta. Size of the new note is 66mm*166mm. It has a motif of the Mangalayan, the low-cost mission of ISRO to Mars on the reverse side and Mahatma Gandhi on front side. 500 rupee note: It has different colour, size, theme, design and location of security features compared to the old notes. It has portrait and electrotype watermarks. The motif Delhi’s Red Fort is on reverse side and Mahatma Gandhi on front side. Size of the new note is 63mm*150mm. 

It was felt that the demonetisation was almost a necessity to root out counterfeit notes which have a direct correlation with terror funding and other fraudulent activities.  It is an act of stripping a currency unit of its status as legal tender. Demonetization is mandatory whenever there is a change of national currency.  In this process, the new currency unit replaces the old unit of currency which is retired. 

If a country is to progress we cannot have less than 10% of the population paying Income Tax. An effort is being made to ensure that people conduct their business in a fair and transparent manner. Increased ‘Digital’ transactions will not only provide convenience to the customers but will also root out corruption and bring down the cost of banking services. It is further necessary that most of the currency in circulation is moving through the banks rather than being stored at various places in an unproductive manner. This will give banks the capacity to lend and also to bring interest rates down in order to spur investment and be competitive. A study by MasterCard shows that the cost of using cash i.e. printing, transporting, storage, soiled notes, etc. is almost 1.5% of GDP. The move to ‘Digital’ transactions, through the Banking System will not only benefit the customer but also the economy through lowering of cost.  There is also need to bring to semi-urban and rural India the convenience of dealing ‘Digitally’ and getting services/ loans at competitive rates.  

This is not the first time the Government or the RBI has demonetised currency in India. For the first time in January 1946, Rs 1,000 and Rs 10,000 banknotes were demonetised. However, these two denominations were reintroduced in 1954 along with currency notes of Rs 5,000. But all these three denominations were again demonetised in January 1978. The RBI more recently in 2014 had demonetised all banknotes printed before 2005.

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Patrick Callahan

Pardesi News Reporter

Pardesi News Reporter

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