Question

Choose the incorrect statement with respect to demonetization:

• A. The two largest denomination notes of ₹ 500 and ₹ 1000 were demonetized with immediate effect, ceasing to be legal tender except for buying properties.
• B. The aim of this step was to curb corruption and accumulation of black money.
• C. It led to the tax administration channelizing savings into the formal financial system.
• D. Restrictions were placed on the convertibility of domestic money and bank deposits.

Hint:

Demonetization aimed to reduce black money — but it never restricted the convertibility of legal money within the domestic system.

Answer 1

The Correct Option is D

India's demonetization initiative, launched on November 8, 2016, involved invalidating ₹500 and ₹1000 currency notes. Analysis of options:

• Option (A): Accurate — The ₹500 and ₹1000 notes were immediately withdrawn. Their use was restricted, with limited temporary exceptions for emergency services only.
• Option (B): Accurate — Key objectives included combating illicit wealth, corruption, and counterfeit currency.
• Option (C): Accurate — Demonetization necessitated the deposit of substantial cash holdings into banks, thereby augmenting formal sector savings.
• Option (D): Inaccurate — No limitations were imposed on converting Indian rupees to other rupees or to bank deposits. Citizens were permitted to exchange old currency for new notes.

Consequently, the assertion in option (D) is factually incorrect and does not align with the features of demonetization.
Final Answer: (D) Convertibility of domestic money and bank deposits was restricted.