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Abstract

Demonetisation is an economic policy where a currency ceases to be recognized as a legal tender. This is tool to curb black money, reduce terror funding, money laundering etc by reducing the cash in the economy which is directly related to these issues. Whenever such large amount of cash is withdrawn, it creates ripples in every sector of the economy especially when the sectors are largely cash driven like handicrafts, textiles, real estate, and construction etc. Demonetization made huge impact on NBFC-MFIs as the industry is entirely cash driven. The paper studies the impact of Demonetization on NBFC-MFIs drawing incidental data from MFIN reports and considering various indicators -collection efficiency, Portfolio at Risk, loan disbursements, mode of disbursements and outstanding borrowing. The findings suggest that the impact of Demonetization was felt across the sector with short term impact being deteriorating. But, post-demonetization period saw improvement in these indicators.