What was the impact of demonetization on cash holdings arising from declared income?

They were readily deposited in banks and exchanged for new notes

The correct answer is option 2- They were readily deposited in banks and exchanged for new notes.

Demonetisation is viewed as a tax administration measure. Cash holdings arising from declared income was readily deposited in banks and exchanged for new notes. But those with black money had to declare their unaccounted wealth and pay taxes at a penalty rate.