Currency in circulation on the rise five years after the note ban
A slowdown in economic growth in the aftermath of the COVID-19 pandemic has kept currency-in-circulation levels high.
November 08, 2021 / 06:08 PM IST
Five years after the government banned high-value bank notes, currency in circulation (CiC) as a proportion of gross domestic product (GDP) was 14.7 percent in 2020-21, the highest in almost a decade, according to the Reserve Bank of India’s annual report for the year.
On November 8, 2016, the government announced that old Rs 500 and Rs 1,000 currency notes will no longer be legal tender in a crackdown on corruption, black money, terror financing and money laundering. The note ban was also aimed at combating counterfeit notes.
In 2020-21, currency in circulation, or CiC made up about 82 percent of reserve money, the RBI report said.
“There was an unusual rise in month-over-month CiC variation during April-June 2020 vis-à-vis the corresponding period of previous years due to the onset of the COVID-19 pandemic and a panic-driven surge in precautionary demand for cash as cushion in a health crisis,” the report said.
The post-pandemic economic slowdown kept the CiC levels high on demand from cash-intensive sectors such as construction and agriculture last year. State elections, the harvest seasons and festive shopping also contributed.
While CiC has increased, digital payments have also surged. The value of Unified Payments Interface (UPI) transactions crossed the $100 billion mark in October. In rupee terms, the value of transactions was Rs 7.71 lakh crore; the number of transactions in the month was 4.21 billion, both record highs, Moneycontrol has reported.
“While it took over four years since the launch of UPI in 2016 for monthly transaction values to cross the Rs 3.86 lakh crore mark in October 2020, the number almost then doubled to cross Rs 7 lakh crore this month,” the Moneycontrol
report said earlier.