Demonetisation refers to the act of stripping a currency as legal tender. In demonetisation the current form of money is removed from circulation and retired. It is an economic process in which a country’s currency unit is no longer legal tender.Demonetisation is a move in which a government bans the notes or coins of a certain denomination. The honorable Prime Minister Narendra Modi announced demonetisation in India on November 8, 2016 where Rs 500 and Rs 1000 notes were withdrawn from circulation. It was a major event of the year 2016. The present paper attempts to explain the meaning of demonetisation, examine the reasons for demonetisation, find out the extent of demonetisation, explore the positive and negative impact of demonetisation on Indian economy and also provides suggestions. The present study is based on secondary data and the secondary sources includes books, journals, websites, magazines, newspapers etc