Demonetisation

Queues were linked to bringing old notes into the banking system. Link it with the role of banks.

It became important to know how customers could pay. Customer convenience helps maintain sales.

Cashless does not mean stopping payments. It means using digital or banking modes instead of cash.

After demonetisation, the use of banking channels and recorded transactions increased, making it easier to scrutinise income, tax payments and sources of funds. Therefore, compliance with tax, accounting and other legal requirements became more important for businesses. Option A is incorrect because proper accounting records support compliance; they do not become unnecessary. Exam tip: Compliance means following laws, tax rules and government regulations.

The governing concept is the distinction between the internal and external business environment. Demonetisation was a government decision made by a public authority, so an individual business could not decide whether it would occur or directly change the policy. Consequently, option A is correct: the decision was outside the control of businesses, although its effects had to be managed by them. A shop owner could adjust prices, payment methods, or inventory, but could not authorise or cancel demonetisation. Customer preference and employee leave are separate operational matters and do not describe the source of the currency decision. The key distinction is between controlling an event and responding to its consequences.

Cash kept at home is part of people’s informal or outside-bank holdings until it is deposited or used through a recognised financial institution. When such cash is deposited after demonetisation, it enters bank records and becomes part of the formal financial system. Banks can then record the deposits, use funds for lending according to rules, and improve the visibility of financial transactions. This does not mean every deposit is illegal or unaccounted money; it simply identifies the type of saving that could be brought into banking.

Option A is correct because cash savings stored at home could be deposited into bank accounts. Marine goods, sports prizes, and school certificates are not forms of savings that can be converted into bank deposits in the way described. The question focuses on physical cash outside formal banking, not on every kind of household asset. Therefore, the correct choice follows from understanding how depositing home-held currency connects private savings with the formal financial system.

The governing concept is the effect of demonetisation on payment practices and business transactions. When commonly used currency notes were withdrawn, customers and sellers needed convenient alternatives to cash. A QR code linked to a bank account, wallet, or payment application allows a buyer to scan, enter the amount, and transfer money electronically. Therefore, installing QR codes represents the provision or expansion of a digital payment facility, so option B is correct. Option A is unrelated because a QR code does not conceal money. Option C has no connection with the purpose of the code, and option D incorrectly treats a payment innovation as the cancellation of law.

After demonetisation, the availability of cash and cash transactions were affected. Therefore, many businesses and organisations had to revise their cash policies, payment arrangements, and use of digital payments. Its effect was not limited to just one group, such as farmers or students. Exam tip: Reduced cash transactions and greater use of digital payments are key effects of demonetisation.

Economic environment affects money and market behaviour of businesses. Demonetisation is a clear example.

Business should quickly adjust to external changes. In exams connect it with adaptation and preparedness.

Demonetisation in India was announced on 8 November 2016. In exams remember the date with the denominations.

Old high-denomination notes were withdrawn during demonetisation. Read the term high-denomination carefully.

Demonetisation is a policy decision by the government to withdraw the legal-tender status of specified currency notes and replace or regulate them through a new currency arrangement. For a business, this change originates outside the organisation and affects the wider economic environment. It can influence cash transactions, consumer demand, banking procedures, accounting practices, liquidity and short-term operations. Therefore, option C, external economic change, is correct. Option A concerns an internal organisational matter, such as changing employees or work procedures. Option B describes a personal preference rather than a business-environment factor. Option D is a physical internal change and has no necessary connection with monetary policy. Demonetisation is thus an external economic event.

Removal of old notes could create cash shortage for some time. Separate immediate effects from long-term effects.

Banking and digital payments increased due to cash shortage. Link it with a less-cash economy in exams.

One aim was to bring undisclosed cash into the banking system. Mention this in black money questions.

Banks played a major role in depositing and exchanging old notes. Link bank role with the currency process.

The governing concept is business adaptation to a change in the economic and technological environment. When availability or use of cash becomes difficult, a retail shop needs another reliable way to receive money from customers. A digital payment machine, such as a card terminal or a device supporting electronic payments, enables payment through a bank account, card, or other approved digital channel. Therefore, option B is correct because it directly addresses the payment problem created by reduced dependence on cash. A lock may provide security but cannot process a sale; a paper cap and a clay pot have no payment function. The example illustrates how shops respond to environmental change by adopting suitable technology.

Higher banking use could support financial inclusion. Inclusion means connecting more people with the financial system.

After demonetisation, old high-value notes ceased to be legal tender, creating an immediate cash shortage for the cash-dependent unorganised sector. Small traders, daily-wage workers and small businesses faced difficulty in making wage payments and carrying out routine transactions. Option B is the opposite of the actual situation, as cash availability fell rather than increased. Exam tip: Link the unorganised sector with cash transactions and daily-wage employment.