Currency in circulation declines to 5.3% after withdrawal of Rs 2,000 notes; digital payments rise: RBI Bulletin

The Reserve Bank of India Bulletin is a monthly publication that offers insights into the developments in domestic and global economies.

Currency in circulation, the largest component of reserve money, declined to 5.3 percent from 8.3 percent in the year-ago period due to the withdrawal of Rs 2,000 notes from circulation and an increase in digital mode of payments, the Reserve Bank of India (RBI) said in its bulletin.

Reserve money, excluding the first-round impact of change in the cash reserve ratio (CRR), grew by 6.8 percent on a year-on-year basis as on June 9, 2023.

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.

On May 19, the RBI withdraw Rs 2,000 notes from circulation based on a review, in pursuance of the “Clean Note Policy”, and it advised banks to stop issuing these notes with immediate effect.

Members of the public were asked to deposit Rs 2,000 banknotes into their bank accounts and/or exchange them for banknotes of other denominations at any branch. Deposit into bank accounts can be made in the usual manner, that is, without restrictions and subject to extant instructions and other applicable statutory provisions.

As on March 31, Rs 2,000 notes in circulation stood at 10.8 percent of the total circulation or Rs 3.62 lakh crore in value terms, according to the RBI's annual report 2022-23.

While, the RBI Governor Shaktikanta Das in June monetary policy said that around 50 percent of the Rs 2,000 currency notes in circulation as at the end March has returned to the banking system. This constitutes around Rs 1.8 lakh crore in terms of value, the governor said.

UPI transactions in May 2023 reached Rs 14.3 trillion in terms of value and 9.41 billion in volume. The number increased by 2 percent in value from Rs 14.07 trillion in April 2023 and 6 percent in volume from 8.89 billion in April 2023.

Additionally, the Bulletin said Unified Payments Interface (UPI) is expected to account for 90 percent of retail digital transactions volume in the next five years.

Further, as on June 2, money supply (M3) growth was higher at 10.5 percent on-year than 8.6 percent in the corresponding period of last year.