Demonetisation is the act by which a government or central bank withdraws specific currency notes or coins from legal tender status — rendering them invalid for transactions — typically with the objective of curbing black money, counterfeit currency, tax evasion, or funding of illicit activities, or as part of a broader currency reform. India's most significant modern demonetisation occurred on November 8, 2016, when the Government of India, in conjunction with the RBI, withdrew ₹500 and ₹1,000 denomination banknotes — which constituted approximately 86% of currency in circulation — requiring citizens to deposit or exchange old notes within a specified window. The 2016 demonetisation had profound short-term impacts on Indian financial markets, GDP growth, consumer spending, and the real estate sector, while accelerating digital payments adoption and bank deposit growth. For investors on Ventura Securities, understanding the economic and market consequences of demonetisation provides important historical context for assessing policy risk in Indian equities and the structural shift toward formalisation of the Indian economy.
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