27th February 2017

New IMTFI blog series on demonetization in India

On November 8, 2016, India demonetized two major banknotes in circulation. According to the Reserve Bank of India (RBI) figures, the denominated notes accounted for 86% of the value of currency in circulation. Importantly, the 500 and 1000 demonetized notes have been replaced by new denominations of 500 and 2000. All of this took place before ATMs were even configured for the new notes! The most visible effects of demonetization were the long queues and cases of numerous casualties and deaths in front of ATMs and banks. With the issuance of the new notes of 500 and 2000, demonetization (“notebandi”) has largely taken the form of replacement, aimed at targeting counterfeiters.

While some see the demonetization move as part of the quest for transitioning to a more digitized payment system, the timing and procedures for the replacement did not take into account factors related to basic infrastructure, coverage, digital financial literacy, and knowledge about the ways in which payments function within formal and informal sectors, social networks and relationships, and barriers related to caste, gender, and literacy, among others.

What lessons does this exercise hold for research on digital financial inclusion in India going forward?

In their special PERSPECTIVES blog series on Demonetization in India, the IMTFI has asked fellows to provide some preliminary reflections on these issues. These include contributions from Vivian DzokotoJanaki SrinivasanDebashis Acharya (part one / part two), Isabelle Guérin, Santosh Kumar and G Venkatasubramanian (part one part two).

Visit the IMTFI for more information and a reflection on these pieces by Ursula Dalinghaus, Nima Lamu Yolmo, and Janaki Srinivasan.