Why are demand deposits not legal tender?

Because demand deposits can be rejected by anyone as a mode of payment. Hence, it is a non-legal tender. Banknotes cannot be rejected by anyone, hence it is known as legal tender. You can read about the RBI – Know More About Reserve Bank of India in the given link.

Further readings:

  1. Bad Banks – Idea Proposed Due to COVID-19
  2. Cashless Economy in India – UPSC GS-III Notes

Related Links

Monetary System – Types of Monetary System 

Black Money: Definition, Sources & Measures to Curb Black Money

Demonetisation Essay – Concepts, Merits, Demerits & Effects 

Money Supply in Economy – Types of Money, Monetary Aggregates, Money Supply Control

List of Different Types of Banks in India

Non Performing Assets (NPA) – Facts for UPSC GS-III

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