On Sunday, according to a report from the news agency PTI, the growth in currency circulation decreased to 3.7% for the week ending February 9, down from 8.2% a year earlier. Currency in circulation (CiC) includes both notes and coins in circulation, while currency with the public is calculated by subtracting cash held by banks from the total currency in circulation.
The decline in currency in circulation is partially linked to the Reserve Bank of India’s (RBI) decision to withdraw Rs 2,000 banknotes. The RBI notes that commercial banks have seen a double-digit growth in deposits in January, which is also attributed to the withdrawal of Rs 2,000 currency notes.
The growth of Reserve Money (RM) slowed down to 5.8% as of February, 2024, from 11.2% a year earlier (8.8% adjusted for the first-round impact of change in Cash Reserve Ratio (CRR)).
Components of Reserve Money include Currency-in-circulation (CiC), banks' deposits in RBI, and other deposits with the central bank. The growth in Currency in circulation, the largest component of Reserve Money, eased to 3.7% from 8.2% a year ago, reflecting the withdrawal of Rs 2,000 banknotes, according to the RBI.
The central bank announced on May 19, 2023, the withdrawal of Rs 2,000 denomination banknotes from circulation. As of January 31st, almost 97.5% of these notes had been returned to the banking system, and only about Rs 8,897 crore worth of such notes were still with the public.
At the close of business on May 19, 2023, the total value of Rs 2000 banknotes in circulation amounted to Rs 3.56 lakh crore, when the withdrawal of Rs 2000 banknotes was announced.
Initially, the public and entities holding such notes were instructed to either exchange or deposit them in bank accounts by September 30, 2023. However, the deadline was later extended to October 7, 2023.
Deposit and exchange services at bank branches were discontinued on October 7, 2023.
The Rs 2,000 banknotes were introduced in November 2016, following the demonetisation of the then prevailing Rs 1,000 and Rs 500 banknotes.