- Demonetization is the act of stripping a currency unit of its status as legal tender. It occurs whenever there is a change of national currency: The current form or forms of money is pulled from circulation and retired, often to be replaced with new notes or coins.
- The opposite of demonetization is remonetization, in which a form of payment is restored as legal tender
- On 8th November 2016, the Government of India announced the demonetization of all 500 and 1000 banknotes of Mahatma Gandhi Series (*)
(*) The Gandhi series of banknotes are issued by the Reserve Bank of India as the legal tender o f Indian Rupee.
Why it was done?
- Prime Minister Modi announced the demonetization of the then existing 500 and 1000 notes and justified the move on the basis of the following points:
- To tackle black money in the economy
- To lower the cash circulation in the economy which “is directly related to the corruption in our country” according to Modi.
- To eliminate fake currency and dodgy funds which have been used by terror groups to fund terrorism in India.
- The Economic Survey 2016-17 describes Demonetization as “A radical governance-cum-social engineering measure, radical and unprecedented step with short term costs and long term benefits where the aim of the action was to curb:
- The use of high denomination notes for terrorist activities, and
- The accumulation of “black money”, generated by income that has not been declared to the tax authorities.
- To signal a regime change, emphasizing the government’s determination to penalize illicit activities and the associated wealth.
Gandhi series of banknotes
- As the name suggests, the series is so called because the obverse of the banknotes prominently display the portrait of Mahatma Gandhi.
- Since its introduction in 1996, this series replaced all banknotes issued before 1996 as legal tender.
- Before 1996, not all the currency notes had Mahatma Gandhi’s face on it, rather there were different pictures ranging from Ashoka Pillar, Tanjore Temple, India Gate, Bengal Tiger, Aryabhatta satellite and many more.
- Each banknote has its amount written in 17 languages.
- On the reverse is a language panel which displays the denomination of the note in 15 of the 22 official languages of India.
Mahatma Gandhi Series of banknotes-2005
- Mahatma Gandhi series 2005 banknotes are issued in the denomination of Rs.10, Rs.20, Rs. 50, Rs.100, Rs.500 and Rs.1,000 and contain some additional or new security features as compared to the previous MG series notes.
- In addition to extra security features, MG series-2005 banknotes have the year of printing on the reverse of the banknotes which is not present in the pre-2005 series.
Mahatma Gandhi (new) series
- The Mahatma Gandhi New Series of banknotes are issued by the Reserve Bank of India (RBI) as the legal tender of the Indian rupee (₹), intended to replace the Mahatma Gandhi Series of banknotes.
- This series of banknotes also prominently displays the portrait of Mahatma Gandhi. The logo of Swachh Bharat Abhiyan and motif of Mangalayan is also printed on the back of the banknotes of this series.
While Rs. 500 note of the series has logo of Heritage site Red Fort, in addition to the logo of Swacch Bharat Abhiyan.