5 years ago, people were expected to surrender currency notes of Rs 1,000 and Rs 500 for mandatory deposit into their bank accounts. These notes were outlawed for any other use except some temporary exceptions for specified purposes. Before the PM’s announcement on 8 November 2016, there were about Rs 18 lakh crore worth currency in circulation of which 85.7 per cent was contributed by these 1000/500 denomination notes. The time lag between deposit in bank account and withdrawal from bank account for such a large swathe of cash caused undeniable distress and disruption in next few months.
Cash-dependent economic activities – which were and are very significant in our economy – definitely suffered. Contrary to hope in some quarters that a sizeable stock of the Rs.1000/5000 currency in circulation may not be surrendered, almost the entire stock came back to banks.
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