Cash in use 26% less than November 8 levels, withdrawals fall for fourth week
MUMBAI: Cash levels in the economy remained at least 26% less than what they were before demonetisation as policy makers are keeping a close watch on the new currency that’s flooding the system. Weekly cash withdrawals too have slowed down after the caps on withdrawals were lifted early March. The surge in digital payments — whether government-driven UPI, or private ones — is also helping people withdraw less cash.
Total cash and currency in the system amounted to Rs 13.32 lakh crore as of March 31, according to the latest Reserve Bank of India data. At current levels, the cash and currency in circulation is 74% of the levels in early November 2016, or 26% less than early November 2016 , when the government banned high value Rs 500 and Rs 1,000 notes. Then, the currency in circulation was Rs 17.97 lakh crore.
Weekly cash withdrawals too have dipped for the fourth consecutive week from Rs 47,400 crore in the week ended March 10 to Rs 22,194 crore in the week ended March 31. It may be recalled that restrictions on daily withdrawals were lifted and the pre-ban limits were restored on March 13.
A shift to digital modes of transfer is largely helping the use of less cash. The government has also introduced a number new digital payment and settlement channels: its United Payments Interface (UPI), an interbank settlement platform, has proved to be extremely useful even in settling small-value transactions.
The number of transactions under UPI has jumped from 42 lakh in February to 49 lakh in March with value of transactions rising from Rs 1,900 crore to Rs 1,970 crore during the period, Going by international benchmarks, the demonetisation initiatives seem to have helped do away with excess cash in the system.
India’s cash-to-GDP ratio was over 13% before the November 2016 note ban, which is now estimated to be at around 11% of the GDP. “Currency in circulation may settle at around 10% to 10.5% of the GDP which is in line with international standards,” SK Ghosh, group chief economic advisor, State Bank of India, told ET.
The demonetisation exercise is expected to permanently extinguish about Rs 1.7 lakh crore worth cash from the system translating into liquidity, according to a report by SBI’s research team. This would be equivalent to about 1.1% of GDP — this, in the process, may add to the Reserve Bank of India’s challenge of liquidity management.
Total cash and currency in the system amounted to Rs 13.32 lakh crore as of March 31, according to the latest Reserve Bank of India data. At current levels, the cash and currency in circulation is 74% of the levels in early November 2016, or 26% less than early November 2016 , when the government banned high value Rs 500 and Rs 1,000 notes. Then, the currency in circulation was Rs 17.97 lakh crore.
Weekly cash withdrawals too have dipped for the fourth consecutive week from Rs 47,400 crore in the week ended March 10 to Rs 22,194 crore in the week ended March 31. It may be recalled that restrictions on daily withdrawals were lifted and the pre-ban limits were restored on March 13.
A shift to digital modes of transfer is largely helping the use of less cash. The government has also introduced a number new digital payment and settlement channels: its United Payments Interface (UPI), an interbank settlement platform, has proved to be extremely useful even in settling small-value transactions.
The number of transactions under UPI has jumped from 42 lakh in February to 49 lakh in March with value of transactions rising from Rs 1,900 crore to Rs 1,970 crore during the period, Going by international benchmarks, the demonetisation initiatives seem to have helped do away with excess cash in the system.
India’s cash-to-GDP ratio was over 13% before the November 2016 note ban, which is now estimated to be at around 11% of the GDP. “Currency in circulation may settle at around 10% to 10.5% of the GDP which is in line with international standards,” SK Ghosh, group chief economic advisor, State Bank of India, told ET.
The demonetisation exercise is expected to permanently extinguish about Rs 1.7 lakh crore worth cash from the system translating into liquidity, according to a report by SBI’s research team. This would be equivalent to about 1.1% of GDP — this, in the process, may add to the Reserve Bank of India’s challenge of liquidity management.
