RBI Reports Circulation Of ‘Cash’ Doubled After Demonetisation

The Logical Indian Crew

June 13th, 2018

Image Credit: The WeekHindustan Times

The latest Reserve Bank of India (RBI) data shows that currency with the public has reached a record high level of over ₹18.5 lakh crore from about ₹7.8 lakh crore, post-demonetization. The data also shows that the total Currency in Circulation (CIC) by the RBI has also more than doubled from ₹8.9 lakh crore to about ₹19.3 crore.


Breaking the Ice

NDTV stated that the total money supply, also described as M3, is now at over ₹140 lakh crore (11% higher than a year ago). Additionally, it stood at ₹120 lakh crore during demonetization and was below ₹100 lakh crore before the BJP Government came to power.

M3 money is also known as Broad Money includes large time deposits, institutional money market funds, funds in bank accounts and anything and everything resembling money. It is the broadest measure to calculate an economy’s money supply.

Furthermore, the figure arrived at is equivalent to the net bank credit to the government, plus the bank credit to the commercial sector, plus net foreign exchange assets of the banking sector, plus government’s currency liabilities to the public, minus the net non-monetary liabilities of the banking sector, NDTV reported.

The currency with the public is calculated after subtracting the cash the with banks from the CIC. The artificial currency crush which instilled back the fears of demonetization days and occurred in many parts of India could have resulted from the hoarding of cash, suggests this data.


A Comparison from Pre-Demonetization Era

Before Demonetization, the cash with the public was at ₹17 lakh crore and the latest figures shows it at ₹19.3 crore as on June 1, 2018, a 30% spike from last year, the ‘reserve money’ data released by RBI noted.

On November 8, 2016, 86% of the country’s currency was invalidated by scrapping the then ₹500 and ₹1000 notes. The people were given time and asked to return the banned notes back to the bank. The drive saw 98.96% of the money being returned or ₹15.28 lakh crore as on June 30, 2017 of the ₹15.44 lakh crore.

The RBI has hence introduced new ₹200, ₹500 and ₹2000 notes into the banking system. The recent cash crunch has also forced the Government to announce that the printing of ₹500 notes would be stepped up.


Analysis

The overall data suggest that how cash is still so vital in the daily lives of people, even after demonetization, which was government’s push towards digitisation.

Furthermore, the cash with the public was at ₹13 lakh crore before the Modi Government and increased to ₹14.5 lakh crore in a year and further crossed ₹16.7 lakh crore by May 2016. The figure fell below ₹10 lakh crore after demonetization only to rise again and ₹15 lakh crore in September, last year. A similar trend was observed with the CIC, NDTV informed.

 

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