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Its been five years since the government had announced demonetisation on November 8, 2016. Since then, the currency with the public continued to rise to a record high of Rs 28.30 lakh crore, as of October 8, 2021, The Indian Express reported on Friday. This was up by 57.48% or Rs 10.33 lakh crore, from a level of Rs 17.97 lakh crore on November 4, 2016. As per records on November 25, 2016, cash with the public has increased by 211% from Rs 9.11 lakh crore.
For the fortnight ending October 23, 2020, the currency with the public increased by Rs 15, 582 crore ahead of the Diwali festival, according to the data from the Reserve Bank of India (RBI). It increased by 8.5% or Rs 2.21 lakh crore, on a YoY basis.
After Rs 500 and Rs 1,000 notes were withdrawn in November 2016, currency with the public which was at Rs 17.97 lakh crore on November 4, 2016, declined to Rs 7.8 lakh crore in January 2017.
Cash continues to be the major form of payment method
Cash has been steadily risen, even though the government and the RBI have pushed for a less-cash society, digitisation of payments, and imposed restrictions on the use of cash in various transactions. The increase was primarily driven by a sudden rush for cash by the public in 2020 as the government announced lockdowns in February, to tackle the spread of the Covid-19 pandemic.
The rise in Currency in Circulation (CIC) in absolute numbers is not the reflection of reality. Till about FY20, the cash in circulation to GDP ratio has been 10 to 12%. However, post the pandemic and due to the growth of cash in the ecosystem, CIC to GDP is expected to inch up to 14% by FY25.
During the festive season, the demand for cash remains high as a large number of merchants still depend on cash payments for end-to-end transactions. Cash remains to be a major mode of transaction for about 15 crore people who do not have a bank account.