Currency in circulation at two thirds the pre-note ban levels in early November

Reporter: Gayatri Nayak

MUMBAI: Currency in circulation is still about two thirds the level in November, implying a slower pace of remonetisation. Many had expected normalcy at much higher levels by February end.

Total currency in circulation amounted to Rs 11.98 lakh crore, as of March 03,’17, according to the latest reserve money data released by the Reserve Bank of India.

At the current levels, the total stock of cash and currencies in the system is still nearly 40% less than the pre-ban levels of Rs 17.97 lakh crore in early November.

Many market analysts had expected that the remonetisation exercise will be complete by end of February. The latest data suggests that the pace of remonetisation has hence slowed down. “Slower pace of remonetisation has kept the banking system in surplus to the tune of INR6trn as opposed to RBI's neutral liquidity stance. Banking system could remain in surplus in the entire first half of next fiscal ”said a research note by Citi.

The current levels of cash and currency in the system as a percentage of GDP is estimated at 8.7% compared to 13.1% in November. The drop in currency in circulation is now closer to the levels in many advanced economies which have these ratios at around 6% of GDP. Analysts also expect that banning Rs 500 and Rs 1000 notes is slowly pushing the economy towards a digital modes of transactions thereby requiring less cash. Hence it is unlikely that the cash in the economy might reach the early November’16 levels.