The acceleration in currency in circulation declined to 3.7 per cent during the week ended February 9, 2024 from 8.2 per cent in the same period a year earlier. This drop was reflective of the impact of the RBI’s decision to withdraw Rs 2,000 banknotes from circulation.
Commercial banks logged a growth of double digits in deposits in January, owing to the withdrawal of the Rs 2,000 banknotes, the official data from the Reserve Bank of India (RBI) revealed. Notably, currency-in-circulation (CiC) represents the notes and coins in circulation, while currency with the public indicated notes and coins in circulation excluding the cash deposited with the banks.
The official data from the banking regulator also revealed that the growth of the Reserve Money (RM) slowed down to 5.8 per cent, as on February 9, 2024, from 11.2 per cent a year earlier, reported PTI. RM includes CiC, banks’ deposits in RBI, and other deposits with the central bank. CiC makes up the largest share of the RM.
Growth in CiC dampened to 3.7 per cent in the period under review, from 8.2 per cent a year earlier, attributed to the withdrawal of Rs 2,000 banknotes.
Notably, the RBI announced earlier in May 2023 that it is withdrawing Rs 2,000 currency notes from circulation. About 97.5 per cent of the currency notes stood returned to the system, as of January 31, 2024. About Rs 8,897 crore worth of the Rs 2,000 banknotes remain with the public still.
The deadline to return these notes to the banks was earlier extended from September 30, 2023 to October 7, 2023. After October 8, 2023, the public was given the choice of either exchanging the currency or getting the equivalent amount deposited in their bank accounts at RBI offices. The Rs 2,000 note was introduced in November 2016, after the government announced the demonetisation of Rs 500 and Rs 1,000 currency notes.
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