De-Monetisation

De-monetisation is a process of replacing some or all of the physical stock of notes in an economy

• De-monetisation can be achieved more rapidly by phasing out high denomination notes (HDNs)
• Contactless payments and digital wallets are increasing the speed & convenience of settling payments using bank deposits
• A number of central banks, including the ECB, the Bank of Canada and the Monetary Authority of Singapore have announced plans to phase out their HDNs
• Ken Rogoff in “The Curse of Cash” argues that the USA’s Federal Reserve should stop printing new $100 bills
• In the UK, the highest denomination note is a £50 note; the 70bn stock of notes is equivalent to over £1,000 per head
• In November 2016, the Indian government under Prime Minister Modi announced a surprise de-monetisation policy

De-monetisation of the Indian economy

In November 2016 the Indian government de-monetized 500 and 1,000 rupee notes and introduced new Rs 500 and Rs 2000 notes. This made 86% of cash in circulation in the Indian economy invalid

Aims:

1. Curb corruption, counterfeiting, funding for terrorism
2. Increase tax compliance and increase tax revenues
3. Stimulate digitalisation of economy
4. Increase flow of savings into formal financial accounts

• E-commerce
• Banking industries
• Financial technology

• Agriculture
• Luxury goods (SUVs, gems, jewellry)
• Real estate
• Traditional retail (roadside vendors, cab drivers)