Question

Demonetization & Note ban, its impact on business and financial Institutions.

Answer 1

Demonetization and note ban is an excellent way to remove black money in the market. Black money prevails in almost all the economies in the world. However, it prevails mostly in the form of Cash or Notes. Demonetization helps to track money source and fund deployment. Hence, whoever is not paying tax or generating income through illegal sources will be under radar of income tax or government. Hence, it's helps to remove the black money and force non tax paying person to pay tax or penalty.

Hence, it increase government's income directly or indirectly. When government gets more tax, it can improve country's industrialization through it's fiscal policy. Therefore, more small scale, medium scale business and jobs will be created.

However, it has some demerits also. Many of the small business uses only cash for day to day operation expense. They will have a hard time at the time of demonetization but once they cope up, in the long run this will be helpful for all the business.

Financial institution will have more business at the time of demonetization. Many people will seek their help when people want to save tax and they will deposit their excess notes to the bank and therefore bank will have more money to invest. Hence, interest rate will come down and more can loan can be issued by bank. It will boost business of the country.