Currency supply still below 50% of pre-note ban days

Recovery may take a few more weeks

Currency supply still below 50% of pre-note ban days

Almost 10 weeks after Prime Minister Narendra Modi announced the demonetisation of high-value banknotes on November 8, there are no signs of a recovery on the cash-availability front.

The dramatic downward trend of the currency liquidity situation, triggered by the demonetisation of Rs 500 and Rs 1,000, valued at around Rs. 15.44 lakh crore, has continued, despite the government’s claims to the contrary.

Latest weekly data released by the Reserve Bank of India (RBI) on Friday revealed that the currency in circulation as on January 6 was just over 49% of the volume of money that was with the public four days before Modi announced the demonetisation drive.

As against Rs. 17.74 lakh crore that was in circulation on November 4 last year, the money in circulation on January 6 was Rs 8.73 lakh crore, according to the data.

The figures reveal that the money in circulation has continuously dropped week after week since early November. There is no recovery yet to regain even levels close to the pre-demonetisation days.

Experts familiar with the situation told DH that the recovery depended on the capacity to print new notes and then effectively distribute them across the country through banking channels.

On both the fronts, there have been severe limitations so far, they added.


In view of the sharp decrease in the availability of cash in the economy, the RBI is yet to ease the existing rules on the post-demonetisation restrictions on cash withdrawals from banks and ATMs.

The experts said, going by the trend so far, it will take at least eight to 10 weeks to restore a semblance of normalcy with regard to currency circulation, after the first signs of recovery are available.

Unless the currency circulation vastly improves, experts feel that the economy will not recover. The government and international banks have already pegged down the GDP growth figures. However, they said that the currency circulation need not be restored to the Rs 17.74 lakh crore of the pre-demonetisation period.

“There was a portion of black money hoarded in cash... Most of that has now entered the banking system in the form of deposits made with demonetised banknotes,” one expert said.

In view of this, it is reckoned that a new currency normalcy could be achieved with a circulation level of around Rs 2 lakh crore below the pre-demonetisation level of circulation.

Liked the story?

  • 0

    Happy
  • 0

    Amused
  • 0

    Sad
  • 0

    Frustrated
  • 0

    Angry