RBI says note-ban impact on GDP over

RBI says note-ban impact on GDP over

Post demonetisation, the RBI on Friday warned of a possible spike in inflation and stressed the need to make digital payments “safe and secure”, even as it felt that the adverse and transient impact on the economy has “by and large” dissipated already.

In a preliminary assessment report on ‘Macroeconomic Impact of Demonetisation’, an RBI paper said Rs 1000/500 notes valued at Rs 15.6 trillion were demonetised, but the precise estimate of currency that returned to the banking system is not yet available as the reconciliation process is still on.

“Hence, the adverse wealth effect on account of SBNs (specified bank notes of Rs 1000/500) not returning to the banking system could be assessed only after the reconciliation exercise is complete,” it said, while adding that the total net currency in circulation has gone up by about Rs 2.6 lakh crore between December-end and early March.

The RBI also said that the surplus liquidity with banks may decline going forward as the remonetisation process moves further which may also lead to some fall in bank deposits. The RBI, which said the paper has been prepared by the staff of Monetary Policy Department with contributions from other departments and should not necessarily be interpreted as its official views, said the wealth effect is another channel through which demonetisation could have impacted the economic activity.

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