Rameshwar's IAS

Merits of Demonetisation

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The aim of Demonetisation is to eradicate corruption in the nation. People who are accustomed to accepting bribes limit their activities because they are afraid they will have to justify the unaccounted funds and risk being scrutinized by tax authorities. It assists the nation's government in tracing the origin of black money. Furthermore, it will assist them in taxing the individual for unaccounted income. For high-value deposits, for instance, a PAN (Permanent Account Number) is required in India. As a result, a person exchanging or depositing a lot of cash during demonetization can easily be tracked down by this income tax authority. Some other advantages of demonetization are:

Illegal activities like terrorism, human trafficking, and money laundering are prevented by this policy. The implementation of such radical monetary policies will put an end to these illegal activities, which rely on unaccounted funds to continue.

The greatest benefit of demonetization is the cessation of counterfeit currency circulation. The majority of fake currencies typically take the form of high-value tenders, which suffer the most.

Additionally, it encourages the use of digital payment methods, which are increasingly demanding in this day and age.

Because public funds flow to banks, banks offer lower lending rates. Subsequently, they are better situated to deal with the liquidity, which implies lower cost of assets and in this manner lower loaning rates.

People tend to deposit the money in their bank account rather than keeping it in physical form, which also results in savings.

Witness a sophisticated banking system: The banking system will significantly improve as a result of the current demonetization move being adequately implemented. The economy will gradually begin to transition completely to cashless transactions. Better credit access and a rethinking of financial operations are also necessary steps in the direction of a cashless economy.

More and more people will make their purchases through online portals. As a result, the government will continue to hold onto the existing white money. Banks and other financial institutions can thus use the newly legalized currency to provide borrowers in need with loans and earn interest on those loans. In terms of liquidity, the monetary or banking system will receive an additional boost. As soon as the withdrawal limits are relaxed, it is necessary to observe how much cash remains in the banking system as the new notes are distributed.

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