New Delhi: Cash withdrawals haven’t picked up even though the limits on withdrawals were removed completely from 13 March, State Bank of India (SBI) said in a research report on Monday.
“In the span of one week (i.e. between 17-24 March), cash withdrawal has declined by Rs20 billion (Rs 2,000 crore)”, said the report.
The report, quoting data from the Reserve Bank of India (RBI) and its own research, also added, “Post-demonetisation (i.e. after 30 December), cash withdrawal has been declining rapidly from a peak of Rs528 billion (Rs52,800 crore) for the week ended 13 January to Rs325 billion (Rs32,500 crore) recently (week ended 24 March).”
Prime Minister Narendra Modi on 8 November demonetised Rs1,000 and Rs500 banknotes as part of his government’s battle against black money, counterfeiting and terror financing. The move led to a severe cash crunch that started easing weeks later as the central bank pumped new high-value banknotes into the system.
The reason for the decline in the cash withdrawals has not been clearly stated in the report. However, it suggests that the fear of strict monitoring of cash usage or the move towards digital payments may have prompted it.
“While it may be difficult to ascribe a reason, our estimates indicate that there would be a permanent liquidity injection of least Rs1.7 lakh crore/1.1% of GDP post demonetisation. This data is a reflection of the extent of formalisation of the economy post demonetisation,” said the report.
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According to figures released by the government, as of now, around 8 billion transactions take place annually through digital payment methods. The government is planning to increase this to 25 billion transactions in the current year.
“The need to withdraw cash has reduced drastically because of the digital thrust by the government. Now, people do not see any reason to hoard cash at home, instead they prefer to deposit it in bank accounts and make payments through digital modes,” said Dewang Neralla, CEO of Atom Technologies Ltd, a payment services provider.