DEMONETIZATION: Impact of fake currency



The discontinuation of the particular
currency which is circulating in the economy and replacing it with new currency
is what demonetization means.

There were many countries where demonetization
happened. The effect of demonetization on some of the countries are i.e. in the
year 1984, the government of Nigeria introduced new currency and banned the old
notes. Therefore due to the population who were under debt and inflation in the
economy hit in the country results in no change and the economy collapsed.

In North Korea, in 2010, the
demonetization happed. This adversely affected the people as they were
suffering with no food as well as no shelter.

As in Australia, it was the first
country who released plastic notes to stop spreading fake currency in the

There were many objectives of
Demonetization to put out black money, the money which terrorists and naxalites
have, fake currency from economy and to make circulation of black money in
economy. Through the event of demonetization, this is the first step taken by
the Indian government which initiated to bring transparency in an economy. From
the day of demonetization enacted, every person of the citizen were seems to be
in a queue outside the bank in order to deposit or withdrawal of money.


DEMONETIZATION: Economic reform

On 8th November 2016 is the
date remembered to every citizen of India. Specially, the black money holder,
terrorists, and corrupted people of India. On 8th November at 8:00pm
the demonetization took place. This was a huge surprise to every citizen of
India by our Honourable Prime Minister of India Sri Narendra Damodar Das Modi.
As this circumstance took place, this became the historic event of India.
Demonetization happened in order to bring changes in the Indian economy by
eradicating huge stock of black money which was flowing in the economy and to
make that money circulate in economy in a productive and right way.

As the government of India announced the
ban on Rs.500 and Rs.1000 notes, the citizen of India were under pressure to
exchange or deposit the currency which got ban.

In the Indian history, this is the first
time demonetization happened. There were the purpose behind the ban of Rs.500
and Rs 1000 currency and introduction of new notes. However, there were several
other countries have embraced it in the past. Some met the purposes, whereas
some failed miserably. There are eight countries that tried demonetization
before India, i.e., Nigeria, Ghana, Pakistan, Zimbabwe, North Korea, Soviet
Union, Australia, and Myanmar.

As the demonetization announced, the
public came in force to exchange and deposit the currency. Every people seems
to be in the queue outside the Banks and ATMs. The notes withdrawn 86% from the
total population.



The main objective is to find out how
fake currency was exploiting the backward and economical week people of the
country before the implication of Demonetization. As in some of the period of
time, the country was suffering inflation as well as deflation due to the
excess flow of money in the economy and due to this the lower and the middle
class people were losing the purchasing capacity in the market.

The purpose of writing this paper is to
analyse and study about the fake currency, expected costs and approach to
comparing benefits and costs. Moreover, this paper helps me to analyse the
reality on what media says and what are the small impact on the poor people.








As the Prime Minister of Indian country
Narendra Modi’s decision on demonetization of high movement currency to
restraint fake currency that was circulating in the Indian economy worthy, its
implementation is not planned and expeditious, and has led to a cash crisis all
over the country, the common man getting affected negatively. Although it is
still not known about the targeted results of demonetization were achieved, the
non planned act frequently caused a huge inconvenience and several issues for
common and ordinary people by directly and indirectly to their daily life and
their livelihoods. And for this, there are many reasons for this. Most of the
common man in Indian country is dependent on cash or currency transactions for
their daily and basic needs and for economic activities. The non cash
transactions like internet banking and credit or debit card transactions are
limited as because such facilities and availabilities are mostly in the urban
or semi-urban areas and only to middle class and rich people. There were most
of the ATMs were not working due the excess shortage of cash. It was clear
that, the Prime Minister and the RBI in their so called Surgical Strike has
failed to take precautions against its negative effects on the common people.As
due to this the life of the citizen got disrupted, as the people were having
insufficient or no money to spend according to their requirements and on theirs



The government’s first step was to
create awareness among people to create their bank accounts under Jan Dhan Yojna.
They were asked to deposit their money into their accounts and also advise them
to do their payments by online or through bank payments in future. Secondly,
the government declared a deadline of 30, 2016 for the same purpose. This
method helps the government to eliminate a huge undeclared amount. However,
there were many people who still holds black money. So the government announced
the demonetization of 500 and 1000 currency notes in order to tackle that

The demonetization system will help
country to become corruption-free. The people who are indulged in taking bribe
will refrain from corrupt practices as it will be hard for them to keep their
unaccounted cash. This step will also help the government to track the black
money. Those individuals who have unaccounted cash are now required to show
income and submit PAN for any valid financial transactions. The government can
get income tax return for the income on which tax has not been paid. This move
will stop the circulation of fake currency. Most of the fake currency put in
circulation is of the high value notes will eliminate the circulation of fake

The demonetization policy will force
people to pay income tax returns. Most of the people who have been hiding their
income are now forced to come forward to declare their income and pay tax on
the same. Even though deposits up to Rs 2.5 lakh will not come under Income Tax
scrutiny, individuals are required to submit PAN for any deposit of above Rs
50,000 in cash. This will help the income tax department to track individuals
with high denominations currency.

The ultimate objective of Demonetization
is to make country a cashless society. All the monetary transaction has to be
through the banking methods and individuals have to be accountable for each penny
they possess.


of study

This study will helpful
for the citizens of the country. The government, businessman and the Indian

Through this study, the
government will be able to know about the future condition of the economy.

This study will help to
the government for policy making to the betterment of the economy.

This study will also
helpful for the citizen of the country they  would be able to know the future condition of
the economy and they can take rational decision so that he will be able to
generate more revenue and can earn the profit in the actual market scenario.

Finally, everybody
would be able to know the impact of note banned decision on country’s economy
and market.



of demonetisation on loan from bank in India

(Here MCLR means (Marginal Cost of
Landing Rates)


Economy on benefit in middle and
long term

On 31st
august Thursday, the finance minister of India conveyed that the fake currency
was routed out of the system and old notes will now no longer be permitted to
be returned. Subhash Chandra Garg, secretary of Department of Economic Affairs
said that, Rs.16000 crore of currency is still out of the banking system and
there is no way that the demonetised currency notes can now be returned.

He has also
said that the two relevant facts must be kept in mind regarding the fake
currency and despite the rush to exchange all demonetised notes, the system was
much careful not to bring fake currency into the system.

He also
conveyed that fake currency was actually put to rout out of the system. This
has had a positive effect on curbing terrorist activities in places like

The government had
demonetised old series Rs. 500 notes and Rs. 1,000 notes in November last year to curb
black money and fake currency notes.

In the first official data
on how much of the currency was returned into the banking system, the Reserve
Bank of India had on Wednesday in its annual report had said that 99 per cent
or Rs. 15.28 lakh crore of the Rs. 15.4 lakh crore of the junked notes were

Finance Minister Arun
Jaitley had said that the objective of demonetisation was also to make a shift
from the predominantly high cash economy.

The Reserve Bank of India,
which had so far shied away from revealing how much of junked currency came
back to system post the November 8 note ban decision, had in its annual report
yesterday said banks have received Rs. 15.28
lakh crore, or 99 per cent of the currency invalidated.

According to submissions by
its lawyers in the Supreme Court, the government had initially estimated about Rs. 5 lakh crore would not come back into the
banking system as holders of unaccounted money may find it difficult to deposit
them in banks — the only source allowed for getting rid of old currency.

Finance Minister Arun
Jaitley said despite the pain associated with demonetisation, the country was
ready for this kind of change.

“It’s nobody’s case that the
black money has totally been eliminated. There are still people who will be
doing such transactions. But, I think, a large amount of that has come in,” he

Speaking at the Economist
India Summit here, Jaitley termed as a “very narrow vision” to consider just
the dent in RBI’s profit due to printing of new currency as the cost of

“When the demonetisation was
initially announced there was an element of uncertainty. There has not been
many such experiments world over and therefore it is natural that there will be
speculation as to how much money will come back,” he said.

The banned notes formed 86
per cent of the currency in circulation at that time. Holders of old notes were
given a 50-day window to deposit them in banks.