Currency rises at snail's pace even after RBI withdrew restrictions on cash withdrawals
MUMBAI: Currency in circulation continues to rise at a snail's pace even after the Reserve Bank of India withdrew restrictions on cash withdrawals from banks in early March.
Total amount of cash and currency in the system amounted to Rs. 13.62 lakh crore as of April 07, according to the latest Reserve Bank of India data. At these levels, total currency in circulation is 24 per cent less than the pre-note ban levels in early November when total currency in circulation was Rs 17.97 crore at the time when government declared the Rs 500 and Rs 1000 notes as illegal.
Cash in the system is increasing at a very slow pace. Weekly cash withdrawals have gone down for the fourth consecutive week from Rs 47,400 crore in the week ended March 10 to Rs 22194 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. In the week ended April 07, currency in circulation rose by only Rs 26390 crore.
The Reserve Bank of India injects currency notes of various denominations in the system according to the demand from time to time. Though over the years efforts have been towards lesser dependence on cash as the regulator is pushing for banking and other digital modes of transaction, cash demand is known to spike at times of elections and in years when monsoons and agricultural output has been good. This is because rural economy is predominantly cash-based.
The demonetisation exercise is expected to permanently erode about Rs 1.7 lakh crore worth cash from the system translating into liquidity, according to a report by SBI' research team. This would be equivalent to about 1.1 per cent of GDP.
Total amount of cash and currency in the system amounted to Rs. 13.62 lakh crore as of April 07, according to the latest Reserve Bank of India data. At these levels, total currency in circulation is 24 per cent less than the pre-note ban levels in early November when total currency in circulation was Rs 17.97 crore at the time when government declared the Rs 500 and Rs 1000 notes as illegal.
Cash in the system is increasing at a very slow pace. Weekly cash withdrawals have gone down for the fourth consecutive week from Rs 47,400 crore in the week ended March 10 to Rs 22194 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. In the week ended April 07, currency in circulation rose by only Rs 26390 crore.
The Reserve Bank of India injects currency notes of various denominations in the system according to the demand from time to time. Though over the years efforts have been towards lesser dependence on cash as the regulator is pushing for banking and other digital modes of transaction, cash demand is known to spike at times of elections and in years when monsoons and agricultural output has been good. This is because rural economy is predominantly cash-based.
The demonetisation exercise is expected to permanently erode about Rs 1.7 lakh crore worth cash from the system translating into liquidity, according to a report by SBI' research team. This would be equivalent to about 1.1 per cent of GDP.
