SYDENHAM COLLEGE OF COMMERCE &

ECONOMICS B ROAD, CHURCHGATE, MUMBAI

400020

PROJECT TITLE :

IMPACT OF DEMONETISATION ON
INDIAN BANKING SECTOR

SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENT UNDER SEMESTER BASED CREDIT AND
GRADING SYSTEM FOR POST GRADUATE SEMESTER IV

PROGRAM UNDER FACULTY OF COMMERCE

MASTERS OF COMMERCE PART II (MORNING)

BANKING AND FINANCE

SUBMITTED BY :
OMKAR . S . NEMLEKAR
ROLL NO : 89
SEMESTER IV

SUBJECT : RESEARCH METHODOLOGY

UNDER THE GUIDANCE OF :

PROF. DR. SAUMITRA . S . SAWANT

UNIVERSITY OF MUMBAI

ACADEMIC YEAR : 2016 - 2017

 DECLARATION

I , OMKAR S NEMLEKAR, student of Masters of Commerce (M.com)

Banking and Finance Group Semester IV, Roll No. 89 of SYDENHAM
COLLEGE OF COMMERCE AND ECONOMICS B ROAD,
CHURCHGATE, MUMBAI 400020, hereby declare that I have completed
the project on IMPACT OF DEMONETISATION ON INDIAN
BANKING SECTOR in the subject RESEARCH METHODOLOGY
for the academic year 2016 2017

SIGNATURE OF THE STUDENT

ACKNOWLEDGEMENT
I would firstly like to thank the UNIVERSITY OF MUMBAI for giving us
the liberty of choosing such a topic which will be benefitted to use in future. I
would like to thank the PRINCIPAL DR. ANNASAHEB KHEMNAR of
SYDENHAM COLLEGE OF COMMERCE AND ECONOMICS for giving
me the opportunity to study in this esteemed college and doing the course of
Banking and Finance. I would like to express my sincere gratitude to PROF.
DR. SAUMITRA . S . SAWANT who is my project guide, as she has been the
guiding light for this project & has also provided me with the best of her
knowledge, advice and encouragement which helped me in successful
completion of this project.

My colleagues and specially my parents who have also supported and

encouraged me, the success of this project to the large extent are also dedicated
to them.

I would like to thank all those who have helped me and whom I have forgotten
to mention in this space.

CERTIFICATE

This is to certify that OMKAR S NEMLEKAR Roll No. 89 student of

MASTERS OF COMMERCE (M.COM) PART II SEMESTER IV
(2016 2017) has successfully completed the project as a part of the partial
fulfillment of the course and he has done this project under the guidance,
supervision and due consultation of PROF. DR. SAUMITRA . S . SAWANT

I. Project Guide :-

Date :-

II. External Examiner :-

Date :-

Place :-

INDEX

SR. NO TOPIC PAGE NO.

CHAPTER I
1 1
INTRODUCTION TO RESEARCH

1.1 RESEARCH 1

1.2 OBJECTIVES OF STUDY 5

1.3 STUDY PROBLEM 6

1.4 SCOPE OF STUDY 7

1.5 SIGNIFICANCE OF STUDY 8

1.6 METHODOLOGY 9

CHAPTER II

INTRODUCTION TO
2 10
DEMONETISATION SYSTEM

2.1 INTRODUCTION 10

2.2 HISTORY OF DEMONETISATION 14

2.3 DEMONETISATION A NON 17

ECONOMIC PRISM

2.4 DEMONETISATION THE GAME 20

PLAN

2.5 SECTORAL IMPACTS OF 25

DEMONETISATION

CHAPTER III
3 CASE STUDY 37

CHAPTER IV

4 47
RESEARCH METHODOLOGY

4.1 METHODOLOGY 47

CHAPTER V
48
5
ANALYSIS AND
INTERPRETATION OF DATA

5.1 ANALYSIS AND INTERPRETATION 48

CHAPTER VI

6 58
FINDINGS AND
RECOMMENDATIONS

6.1 FINDINGS 58

6.2 RECOMMENDATIONS 59

CHAPTER VII

7 60
CONCLUSION AND
SUGGESTIONS
7.1 CONCLUSION 60

7.2 SUGGESTIONS 61

CHAPTER VIII

8 63
BIBLIOGRAPHY
 EXECUTIVE SUMMARY

On the 8th of November, 2016 when the sun had descended below the horizon
and the light of day had completely faded, when people were returning back
home from a long day at work, a misty light of a new economy was brewing
over the country. All 500 and 1000 banknotes of the Mahatma Gandhi Series
ceased to be legal tender in India from 9 November 2016.The government
claimed that the demonetisation was an effort to stop counterfeiting of the
current banknotes allegedly used for funding terrorism, as well as a crackdown
on black money in the country. The move was described as an effort to reduce
corruption, the use of drugs, and smuggling

However, in the days following the demonetisation, banks and ATMs across the
country faced severe cash shortages. Also, following Prime Minister Narendra
Modi's announcement, the BSE SENSEX and NIFTY 50 stock indices crashed
for the next two days. The term demonetisation has become much more than a
household name since the old 500 and 1,000 notes were pulled out of
circulation. While as per dictionary demonetisation means "ending something
(e.g. gold or silver) that is no longer the legal tender of a country", one needs to
understand that there is much more than the literal meaning to the word

One need to understand that 80% of India's labour force is employed in the
informal sector, which comprise of 45% of the GDP of our country. Over 60%
of population of India lives in below the international poverty threshold line of
1.9$ per day. Since our economy is an under banked economy, present
demonetisation move, would no doubt cause a severe social experiment, across
the segment of our population. At the first place and on a short term basis this
move would benefit the Government, which shall effectively deploy its
resources to percolate the impact to the poor and needy of our country
The government on 8th November announced that INR 500 and INR 1000
notes will cease to be legal tender effective immediately. The move is aimed at
controlling black money, fake currency circulation and terror financing India
has amongst the highest levels of currency in circulation at 13% of GDP. The
demonetization of 500 and 1000 bank-notes was a policy enacted by the
government of India on 8th November 2016, ceasing the usage of all 500 and
1000 banknotes of the Mahatama Gandhiji Series as legal tender in India from
9th November 2016

The Announcement was made by Prime Minister of India Narendra modi in an

unscheduled live televised address at 20:15 Indian standard time on November
8. In the Announcement, Modi declared that use of all 500 and 1000
banknotes of Mahatama Gandhi series would be invalid after the midnight of
that day, and announced the issuance of new 500 and 2000 bank notes of the
new Mahatama Gandhi Series.

The government claimed that the demonetization was an effort to stop

counterfeiting of the current bank notes allegedly used for funding terrorism as
well as a crackdown on black money in the country. The move was described as
an effort to reduce corruption, the use of drug, and smuggling. Initially, the
move received support from several bankers as well as from some international
commentators.

It was heavily criticised by members of the opposition parties, leading to

debates in both houses of parliament and triggering organised protests against
the government in several places across India. The move is considered to have
reduced the country's GDP and industrial production. As the cash shortages
grew in the weeks following the move, the demonetisation was heavily
criticised by prominent economists and by world media at large