Banks and Demonetisation
The recent exercise of demonetisation has had impact on all the sectors including banks. There was huge inflow
of deposits into due to demonetisation. In this paper, we would like to comment on the effects of demonetisation on banks
and the factors that resulted in the recent hike in transaction costs. Starting with money market equilibrium, this paper
discusses, pre and post demonetisation effects on banks. Scenario of corporate sector, increase in deposits and RBI’s
intervention have been taken into account along with a few other factors. Finally, effort has been made to comment on the
scenario of banks in the long run considering food inflation and RBI’s stance to control inflation.