BackNew currency circulation post note ban reaches 84%: SBI report
With the decline in cash in hand with banks, the currency with public has been showing a steady increase, says a report by the State Bank of India
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New Delhi: Eight months since the shock demonetisation of high-value currency notes, the new printed currency in circulation has reached close to pre-demonetisation levels at 84%, State Bank of India (SBI) said in a research report on Wednesday.
“As on 7 Jul’17, the newly printed currency in circulation (CIC) has reached 84% of the extinguished one (CIC at 86% of pre-demonetised levels). In addition, cash on hand with banks, a CIC component has now declined to 5.4% of the former (from the peak level of 23.2% in Nov’16)," said the report titled ‘Demonetization and Cash efficiency’, authored by Soumya Kanti Ghosh, group chief economic adviser, SBI.
Currency in circulation consists of two components, currency with public and cash on hand with banks. With the decline in cash in hand with banks, the currency with public has been showing a steady increase, said the report.
The report states that the non-availability of lower denomination notes in ATMs might be due to the cash on hand with banks.
“Historical trends suggest that cash on hand with banks is roughly 3.8% of CIC and currently it is at 5.4%. This means at least an additional amount of 1.6%/ Rs25,000 crore of excess currency may be currently lying in ATMs, and these could be precisely because of such reasons, like non-availability of Rs100 notes," added the report.
It thus highlights the importance of new Rs200 notes which could serve as the missing middle.
An incremental Rs2.5 trillion of notes in value terms are still to be replenished (3 -4 billion pieces of Rs500 notes have not been printed) if we replenish the entire demonetised stock.
Herein lies the importance of new Rs200 notes for which the Reserve Bank of India (RBI) has recently put orders, said the report.
The RBI is expected to introduce Rs200 notes in the coming months to ease pressure on lower-denomination currencies that are in short supply.
The new notes of Rs200 should be out before the end of 2017 and will greatly help in narrowing the demand and supply gap in smaller-denomination currency bills, said a Press Trust of India story.
Also read: RBI to issue ₹ 200 notes in coming months
Last year in November, the government had demonetised the old Rs500 and Rs1,000 notes.
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