Currency in circulation growth falls to 4.4% after withdrawal of Rs 2,000 notes: RBI Bulletin

Rs 2000 note

Growth in currency in circulation (CIC), the largest component of reserve money, declined to 4.4 percent from 8 percent due to withdrawal of Rs 2,000 notes from circulation, the Reserve Bank of India (RBI) said in its monthly bulletin.

The withdrawal of Rs 2,000 banknotes from circulation, announced on May 19, resulted in a decline in CIC growth between May 19 and June 30 in 2023 when compared with the corresponding period of previous years, the RBI said.

About 87 percent of the notes received back from circulation as on June 30, 2023 have been deposited with the banks, the Bulletin said.

On July 3, the central bank said that 76 percent of Rs 2,000 banknotes in circulation have been returned. The total value of Rs 2,000 banknotes received back from circulation was Rs 2.72 lakh crore up to June 30, 2023.

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Consequently, Rs 2,000 banknotes in circulation as at the close of business on June 30 stood at Rs 0.84 lakh crore.

Data collected from major banks indicates that out of the total banknotes in Rs 2000 denomination received back from circulation, about 87 percent is in the form of deposits and the remaining around 13 percent has been exchanged into other denomination banknotes, the RBI said in a release.

The RBI Bulletin is a monthly publication that offers insights into the developments in domestic and global economies, but doesn’t represent the views of the central bank.

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Separately in the Bulletin, the RBI said that as on June 30, 2023 money supply (M3) growth was higher at 11.3 percent (y-o-y) than 8.9 percent in the corresponding period of last year.

Aggregate deposits with banks increased by 12.4 per cent (9.2 per cent a year ago). Reflecting the return of Rs 2,000 banknotes, the currency to aggregate deposit ratio declined and correspondingly, the money multiplier increased.