BUSINESS

Impact of Rs 2,000 Note Withdrawal: Growth in Currency in Circulation Drops To 3.7% in February

The Reserve Bank of India’s (RBI) decision to remove Rs 2,000 banknotes had an effect on the increase of money in circulation, which slowed to 3.7% for the week ending February 9 from 8.2% a year earlier.

Notes and coins in circulation are referred to as currency-in-circulation (CiC), while notes and coins in circulation less cash held by banks is referred to as currency with the public.

The RBI claims that double-digit rise in deposits was recorded by commercial banks in January, and that this increase is also related to the removal of Rs 2,000 in currency notes.

According to RBI statistics, the growth of Reserve Money (RM) slowed to 5.8% on February 9, 2024, from 11.2% on the same day the previous year (8.8% adjusted for the first-round effect of changes to the Cash Reserve Ratio (CRR).

CiC, bank deposits at the RBI, and other deposits with the central bank are components of RM.

Due to the elimination of Rs 2,000 in banknotes, the increase in CiC, the biggest component of RM, slowed to 3.7% from 8.2% a year earlier, according to the RBI.

The RBI said on May 19, 2023, that banknotes with the denomination of Rs 2,000 will no longer be in circulation.

As of January 31, only around Rs 8,897 crore worth of Rs 2,000 banknotes remained in circulation, with almost 97.5% of the notes having been returned to the banking system.

When the removal of Rs 2,000 banknotes was announced on May 19, 2023, at the end of business, the total amount of Rs 2,000 banknotes in circulation was Rs 3.56 lakh crore.

The first request was made to the public and organizations in possession of these notes to exchange them or place them in bank accounts by September 30, 2023. Later, the deadline was moved until October 7, 2023. On October 7, 2023, deposit and exchange services were terminated at bank branches.

Beginning on October 8, 2023, people would have the option of exchanging their cash or having the equal amount deposited to their bank accounts at any one of the 19 RBI locations.

After the Rs 1,000 and Rs 500 banknotes that were in circulation at the time were demonetised, the Rs 2,000 banknotes were released in November 2016.

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