JOIN US This is not the first time in independent India that the government has demonetised currency notes.
A similar exercise was conducted in 1978 under Prime Minister Morarji Desai when the government discontinued the circulation of Rs 1,000, Rs 5,000 and Rs 10,000 notes.
The then Finance Minister H M Patel and the then Reserve Bank of India Governor I G Patel oversaw the demonetisation exercise.
According to reports, gold, commodity and diamond prices had slumped between 5% and 10% within a week of the announcement. Parliament had enacted the High Denomination Bank Notes (Demonetisation) Act in 1978 to cease the circulation of the currency notes.
“The availability of high denomination banknotes facilitates the illicit transfer of money for financing transactions which are harmful to the national economy or which are for illegal purposes,” read the preamble of the Act stating the reasons for taking the step.
In 1998, the NDA government had amended the law to reintroduce the Rs 1,000 note.
Prior to Independence, demonetisation was carried out in 1946 when the government had decided to discontinue Rs 10,000 notes that were introduced in 1938.
More recently, in January 2014, the Centre had announced the discontinuation of all banknotes printed before 2005 as the RBI introduced notes with more security features.