Four years after demonetization, cash in system at all-time high

mangaloretoday.com/ yahoo

New Delhi, Nov 09, 2020: Four years after demonetization, not much has changed in terms of cash available in the Indian system. On the fortnight ending October 23, 2020, notes worth a staggering Rs. 26.19 lakh crore remained with the public, despite the government pushing for digital transactions.

On November 4, 2016, four days before the move, Rs. 17.97 lakh crore was available with citizens.

Here’s more.

Move: The effect of PM Modi’s unprecedented move was seen soon

After Prime Minister Narendra Modi announced on November 8, 2016, that the existing Rs. 500 and Rs. 1,000 notes will be rendered useless, the move’s impact was seen almost instantly.

In January 2017, the cash in the system came to be around Rs. 7.8 lakh crore.

Notably, RBI calculates currency with the public after deducting cash with banks from total currency in circulation.

Details: Coronavirus-linked restrictions led to more cash withdrawal

However, in the following years, cash in the system rose steadily.

From January 3, 2020, to October 23, 2020, the amount of currency with the public went from Rs. 21.79 lakh to Rs. 26.19 lakh crore.

This was mostly driven by a race for cash between March and May when the government imposed restrictions to check the spread of coronavirus.

Statement: Expert claimed data doesn’t reflect the true reality

While the figures show Indians have still not ditched the traditional mode of payments, a senior banker said it doesn’t reflect reality.

"What needs to be taken into account is the currency to GDP ratio, which had come down after demonetization. But this would have gone up of late with the decline in the growth," the person told IE.

Study: RBI’s study on digital transactions arrived at interesting conclusions

Separately, a study by RBI found that while digital transactions have increased, currency in circulation to GDP ratio has also simultaneously swelled, falling in line with the "overall economic growth."

"An increase in digital payments to GDP ratio over a period of time does not seem to automatically imply a fall in the currency to GDP ratio of the country," said RBI.