Demonetisation Demonitisation 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, often to be replaced with new coins or notes. On November , the Indian Prime Minister Mr.
Narendra Modi announced the demonetization of all ₹ and ₹ bank notes of the Mahatma Gandhi Series. However, more than % of those currencies came back to the RBI. . .
Objectives of Demonetisation . Removing Black Money from the country. . Stopping of Corruption.
. Stopping Terror Funds. . Curbing Fake Notes Summary It is well-recognized that the financial sector plays a critical role in the development process of a country.
Financial institutions, instruments and markets that constitute the financial sector act as a conduit for the transfer of resources - - Banking from net savers to net borrowers, that is, from those who spend less than they earn to those who spend more than they earn. The outcome of the various reform measures so far has been impressive and banks have responded to the deregulation and the increasingly competitive environment by restructuring their operation and upgrading performance standards. However, in the 2010s the volumes of NPAs have increased sharply. Glossary Commercial Banks: These are the institutions that make short term loans to business and in the process create money.
Credit Creation: It means the multiplication of loans and advances. Commercial banks receive deposits from the public and use these deposits to give loans. Non-Bank Financial Institution (NBFI): It is a financial institution that does not have a full banking license or is not supervised by the central bank. Central Bank: It is an apex institution that manages a state’s currency, money supply, and interest rates.
Central banks also usually oversee the commercial banking system. Bank Rate: It is the rate at which the Central Bank of a country is prepared to re-discount the first class securities. Statutory Liquidity Ratio