Currency In Circulation Dips By 5.3% Due To Rs 2,000 Note Withdrawal. Digital Payments Rise: RBI Bulletin
As part of the "Clean Note Policy," the Reserve Bank of India (RBI) decided to withdraw Rs 2,000 notes from circulation starting May 19.
Currency in circulation, which is the largest part of the reserve money, declined to 5.3 per cent from 8.3 per cent in the year-ago period due to the withdrawal of Rs 2,000 notes from circulation and an increase in digital mode of payments, the Reserve Bank of India (RBI) said in its bulletin on Friday. The RBI Bulletin is a monthly publication that offers insights into the developments in domestic and global economies. However, it doesn’t represent the views of the central bank.
Reserve money refers to the total amount of money held by the central bank of a country. The RBI also reported that reserve money, excluding the initial impact of changes in the cash reserve ratio (CRR), grew by 6.8 per cent compared to the same period last year, as of June 9, 2023. The cash reserve ratio (CRR) is the portion of deposits that banks are required to hold as reserves with the central bank. When there is a change in the CRR, it can have an immediate impact on reserve money.
As part of the "Clean Note Policy," the Reserve Bank of India (RBI) decided to withdraw Rs 2,000 notes from circulation starting May 19. In line with the policy, banks were instructed to stop issuing these Rs 2,000 notes immediately.
To facilitate the withdrawal process, members of the public were encouraged to deposit their Rs 2,000 banknotes into their bank accounts or exchange them for banknotes of other denominations at any bank branch. The deposit into bank accounts could be done in the usual manner, without any restrictions, and in compliance with existing instructions and applicable statutory provisions.
Also Read: Inflation Slowing Down Consumption, Holding Private Investment: RBI Bulletin
As on March 31, Rs 2,000 notes in circulation stood at 10.8 per cent of the total circulation or Rs 3.62 lakh crore in value terms, according to the RBI's annual report 2022-23.
While, the RBI Governor Shaktikanta Das in June monetary policy said that around 50 per cent of the Rs 2,000 currency notes in circulation as of the end of March have returned to the banking system. This constitutes around Rs 1.8 lakh crore in terms of value.
In terms of value, UPI transactions in May 2023 amounted to Rs 14.3 trillion, with a volume of 9.41 billion. This represents a 2 per cent increase in value compared to April 2023, when it stood at Rs 14.07 trillion, and a 6 per cent increase in volume compared to April 2023, which recorded 8.89 billion transactions.
According to the Bulletin, the Unified Payments Interface (UPI) is expected to contribute to 90 per cent of the total volume of retail digital transactions in the next five years.
“UPI is expected to account for 90 percent share of the total retail digital transactions volume in the next five years, growing from 75.6 per cent in the fiscal year (FY) 2022-2023,” the bulletin said.
Furthermore, as of June 2, 2023, the growth of money supply (M3) was higher at 10.5 per cent compared to the corresponding period of the previous year, which recorded a growth of 8.6 per cent.
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