Impact of Rs 2,000 notes withdrawal: Currency-in-circulation growth dips to 3.7% in Feburary

The expansion in forex in circulation decelerated to three.7 per cent for the week ended February 9 from 8.2 per cent a yr in the past, reflecting the impression of the choice of the Reserve Financial institution of India (RBI) to withdraw Rs 2,000 banknotes. Forex-in-circulation (CiC) refers to notes and cash in circulation, whereas forex with the general public includes notes and cash in circulation minus money with banks. In line with the RBI, industrial banks have reported double-digit development in deposits in January, which too may be attributed to the withdrawal of Rs 2,000 forex notes.

The expansion of Reserve Cash (RM), as per the RBI knowledge, decelerated to five.8 per cent as on February 9, 2024, from 11.2 per cent a yr in the past (8.8 per cent adjusted for the first-round impression of change in Money Reserve Ratio (CRR). Elements of RM embody CiC, banks’ deposits in RBI and different deposits with the central financial institution.

The expansion in CiC , the biggest element of RM, decelerated to three.7 per cent from 8.2 per cent a yr in the past, reflecting the withdrawal of Rs 2,000 banknotes, in line with the RBI. On Could 19, 2023, RBI introduced the withdrawal of Rs 2,000 denomination banknotes from circulation. As on January 31, almost 97.5 per cent of the Rs 2,000 banknotes have been returned to the banking system, and solely about Rs 8,897 crore price of such notes are nonetheless with the general public.

The whole worth of Rs 2,000 banknotes in circulation was Rs 3.56 lakh crore on the shut of enterprise on Could 19, 2023, when the withdrawal of Rs 2,000 banknotes was introduced. Public and entities holding such notes have been initially requested to both trade or deposit them in financial institution accounts by September 30, 2023. The deadline was later prolonged to October 7, 2023. Deposit and trade companies at financial institution branches have been discontinued on October 7, 2023.

Beginning October 8, 2023 people have been supplied with the selection of both exchanging the forex or having the equal sum credited to their financial institution accounts on the 19 places of work of RBI.
The Rs 2,000 banknotes have been launched in November 2016, following the demonetisation of the then-prevailing Rs 1,000 and Rs 500 banknotes.