Movie Case Study
The scene that you just saw shows Carter (played by Chris Tucker), who is an FBI agent having a conversation with the kidnapper. The kidnapper has abducted an 11-year-old Chinese girl and is demanding 50 million dollars as ransom. He asks for 50 million dollars to be sent to him as 20 million in 50, 20 million in 20, and 10 million in 10.
In this blog, Learning Perspectives will explore the meaning of denomination.
What is Denomination?
Denomination in currency usually means banknotes or coins. Similar to what the kidnapper mentions, he says he wants 20 million dollars in 50. This means that he wants 20 million dollars in the banknotes of 50. Mathematically, it would look like this:
400,000 notes of $50 each = $20,000,000.
10,00,000 notes of $20 each = $20,000,000
1,000,000 notes of $10 each = $10,000,000
A total of 50 million dollars. A denomination is a monetary unit. There can be sub-units in currency too. It is quite common in India and the Asian sub-continent to refer to large amounts of money in lakhs (0.1 million) and crores (10 million or 100 lakhs).
A denomination is given to currencies, securities, and bonds as well. This is true for the Automated teller machines (ATMs) which dispense money in a certain denomination. So, if one withdraws, Rs. 1000, one can get either directly a 1000 rupee note, 10 banknotes of Rs. 100, or 20 banknotes of Rs. 50 or 2 banknotes of Rs. 500. There can be many other combinations as well.
What is Demonetization?
On 8th November 2016, banknotes of Rs. 500 and Rs. 1,000 were demonetized overnight. The government of India also announced fresh issuance of Rs. 500 and Rs. 2,000 banknotes.
Demonetization meant Rs. 500 and Rs. 1000 banknotes will cease to exist as legal tender. This step was taken to curb black money, counterfeit currency, and terrorist-funded currency in the economy. According to the RBI report, 99.3% of demonetized currency came back into the system.
Impact of Demonetization
There were several other impacts of this change on the economy. India became a cashless economy at the time and many local players came into existence. Digital wallets became the norm in 2016. 5 years later, when COVID hit, India was already a digitized economy.