How RBI Tried to Reduce Liabilities by Bringing Demonetization: Success or Failure?
The idea behind demonetization was that if a significant amount of currency did not come back to the banking system,those notes would become worthless
How RBI Tried to Reduce Liabilities by Bringing Demonetization: Success or Failure?
How RBI Tried to Reduce Liabilities by Bringing Demonetization Introduction On November 8, 2016, the Indian government, led by Prime Minister Narendra Modi, announced the demonetization of Rs. 500 and Rs. 1000 currency notes. This meant that these notes were no longer considered legal tender, and people had to exchange them for new currency through banks. The main goal of this move was to tackle issues like black money, fake currency, and corruption. The Reserve Bank of India (RBI), as the country's central bank, played a crucial role in executing this decision. One of the lesser-discussed reasons for demonetization was the idea that if a large portion of the old notes did not return to banks, the RBI’s liabilities would decrease. But did this actually happen? Let's break it down in simple terms. Why Did RBI Want to Reduce Liabilities? The Reserve Bank of India is responsible for printing and managing currency in the country. Every currency note that the RBI issues is considered it…
