Cash with public at record high of Rs 31 lakh cr

New Delhi: Six years after the Union government announced demonetisation on November 8, 2016, currency with the public has hit a new high. With cash remaining the preferred mode of payment, currency with public for the fortnight ended October 21, 2022 stood at a record high of Rs 30.88 lakh crore — up 72 per cent or Rs 12.91 lakh crore from Rs 17.97 lakh crore on November 4, 2016.

Cash with the public has shot up by 239 per cent from Rs 9.11 lakh crore recorded on November 25, 2016, two weeks after Rs 500 and Rs 1,000 notes were withdrawn from the system. According to the RBI data, in the fortnight ended October 21, 2020, the currency with the public rose by Rs 25,585 crore — on the eve of the Diwali. It rose by 9.3 per cent, or Rs 2.63 lakh crore, on a year-on-year basis.

After Rs 500 and Rs 1,000 notes were withdrawn from the system in November 2016, currency with the public, which stood at Rs 17.97 lakh crore on November 4, 2016, declined to Rs 7.8 lakh crore in January 2017 soon after demonetisation. Currency with the public is arrived at after deducting cash with banks from total currency in circulation (CIC). Currency in circulation refers to cash or currency within a country that is physically used to conduct transactions between consumers and businesses.

Cash in the system has been steadily rising, even though the government and the RBI pushed for a "less cash society", digitisation of payments and slapped restrictions on the use of cash in various transactions. The jump was primarily driven by a rush for cash by the public in 2020 as the government announced a stringent lockdown to tackle the spread of the Covid pandemic. As nations around the world announced lockdowns in February, people began accumulating cash to meet their grocery and other essential needs.

The sudden withdrawal of notes in November 2016 had roiled the economy, with demand falling, businesses facing a crisis and GDP growth declining nearly 1.5 per cent. Many small units were hit hard and shut shutters after the note ban. It also created a liquidity shortage.