DEMONETIZATION OF FIAT MONEY Flashcards
What is demonetization?
The official process where a government strips existing currency units (banknotes, coins) of their legal tender status.
This means the specified currency is no longer valid for transactions.
Has demonetization occurred in India before 2016? If so, when?
Yes. India experienced demonetizations in:
1946
1978
What were the primary aims of India’s 2016 demonetization?
Counterfeit Currency: To reduce circulation of fake banknotes.
Terror Funding: Aimed to disrupt the financing of terrorism.
Black Economy: To combat untaxed income fueling an underground economy.
What is the Specified Bank Notes (Cessation of Liabilities) Act, 2017?
This act was passed following demonetization.
It relieved the Reserve Bank of India (RBI) of the obligation to exchange demonetized ₹500 and ₹1000 notes.
What exceptions were there to restrictions on using demonetized Indian banknotes?
Research: Institutions/individuals could keep small amounts for research.
Numismatics Coin/medal collectors could retain the notes.
Museums: Museums could hold notes for display/study.
How did the Supreme Court of India rule on the 2016 demonetization?
The Supreme Court upheld the government’s decision to demonetize currency.
However, the Court’s judgment likely delves deeper into legal process, economic impacts, etc. (Further research is recommended on this specific ruling).
