What is demonetisation?
It is an act of stripping a currency unit of its status as legal tender. Demonetization is mandatory whenever there is a change of national currency. In this process, the new currency unit replaces the old unit of currency which is retired.
Demonetisation in India
- For the first time in January 1946, Rs 1,000 and Rs 10,000 banknotes were demonetised. However, these two denominations were reintroduced in 1954 along with currency notes of Rs 5,000.
- All these three denominations were again demonetised in January 1978.
- The RBI more recently in 2014, had demonetised all banknotes printed before 2005.
- Rs 500 and Rs 1000 denominations are now being demonetised in 2016