Effect of demonetization on microfinance industry in India

Kishore Kumar Das; Shahnawaz Ali

doi:10.20525/ijrbs.v10i3.1105

Authors

Kishore Kumar Das
Shahnawaz Ali Catholic university in Erbil https://orcid.org/0000-0002-5114-2426

DOI:

https://doi.org/10.20525/ijrbs.v10i3.1105

Keywords:

Micro-finance, Demonitisation, Payments Bank, Cashless Economy, Financial Inclusion, Self-Help Group (SHG), Digitalisation

Abstract

High-value denomination currency was scrapped off from the Indian economy on 8th November 2016, Rs. 500 and Rs. 1,000 currency notes were declared invalid at midnight hour. Taking such a bold step by Hon. Prime Minister of India Mr. Narendra Modi, means declaring 86% of cash in circulation an illegal tender overnight. This study is conducted on the immediate effect of demonetization on the microfinance industry in India and its after-effects in the later years. We have analyzed the data collected from the rural sector, on the collections and lending, impact on the farmers, how it has affected the small microfinance companies. We have also analyzed RBI’s initiative towards financial inclusion, Pradhan Mantri Jan Dhan Yojana (PMJDY), the emergence of new Small Finance Banks, Digital Banks, Payment banks, etc. We have critically analyzed the impact of cost versus the benefit from the demonetization exercise for the rural and microfinance industry. The aim of this study is to analyze the overall financial inclusion of the rural and small sectors towards the dream of a Cashless Economy.

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