The demonetisation exercise of November 8 last year has induced households to shift toward formal channels of savings.

There has also been a noticeable downward shift in the currency demand of public, concluded an article, ‘Impact of Demonetisation in the Financial Sector’, published in the Reserve Bank of India’s latest bulletin.

Also, during demonetisation, there was a distinct increase in saving flows into equity/debt oriented mutual funds and life insurance policies.

Apart from this, non-banking financial companies seem to have recorded improvement in collections and disbursals.

The article highlights that the demonetisation-led increase in CASA (current and savings accounts) deposits also led to significant improvement in transmission to bank lending rates during post-demonetisation period.

The challenge, going forward, would be to channel these funds into productive segments of the economy and expand the footprints of the digital economy, which has undergone a sharp increase —another important consequence of demonetisation.

There has also been a sharp increase in the number of accounts under the Pradhan Mantri Jan Dhan Yojana and the deposits in such accounts have also surged, which has given a boost to financial inclusion efforts.

There has been a significant shift in the income elasticity of currency demand in the post-demonetisation period to 0.9 from more than 1 in the pre-demonetisation period, reflecting a reduction in cash intensity in retail transactions.

The ‘excess’ low-cost bank deposit growth, a mirror image of the decline in currency in circulation, following demonetisation has been estimated in the range of 3-4.7 percentage points.

Since demonetisation, 50 million new accounts were opened under Pradhan Mantri Jan Dhan Yojana by October 2017.

The amount of unusual cash deposits in special types of accounts (such as the basic savings bank deposit, PMJDY, Kisan Credit Card, loan accounts and the like) is estimated in the range of ₹1.6-1.7 trillion.

In an environment of a surge in low-cost CASA deposits, banks announced a large cut in their marginal cost of funds based lending rates with a 100 basis points reduction in 1-year MCLR (marginal cost of funds-based lending rate).

A sizeable expansion in the collections of debt/income oriented mutual funds occurred after demonetisation i.e. during November 2016 to March 2017. The Assets under Management by mutual funds increased from about ₹16 trillion to ₹21 trillion between end-October 2016 and end-October 2017.

There has been accelerated digitisation of retail payments.

The latest data reveal that pre-paid payment instrument volumes increased by 54 per cent between November 2016 and August 2017.