Updated: May 8, 2021 7:47:35 am
Amid growing calls for lockdown alongside a sharp rise in Covid cases across the country, there has been a continuing rise in cash with public as it hit an all-time high of Rs 28.03 lakh crore in the fortnight ended April 23, 2021.
According to the data released by the Reserve Bank of India, the currency with public rose by Rs 15,919 crore in the fortnight ended April 23 to cross the Rs 28 lakh crore mark for the first time. In the previous fortnight ended April 9, cash with public had risen by Rs 30,191 crore. Since February 1, the cash with public is up by Rs 96,776 crore.
Traditionally, it has been seen that an uncertain environment leads to a rise in cash holding by public. Recent actions by state governments to enhance the severity of lockdowns (over previous weeks) and growing calls of a nationwide lockdown have forced people to withdraw money from bank and keep cash with them both for medical exigencies and basic needs in current times. As calls for a complete nationwide lockdown have been pouring in both from domestic and international fraternity, banking experts say that in the coming weeks, this holding of cash by public may rise further.
Bankers say that the rise in currency with public indicates that people have started to accumulate cash in anticipation of more stringent lockdown measures that states or central government may announce to control the spread of Covid-19. A banker, who did not wish to be named, said that several individuals are withdrawing cash to meet any urgent cash requirements in case of a health emergency in the current times.
Last year, when the government announced a stringent lockdown in March, there was a big jump in currency with public. Between March and June 2020, the currency with public shot up by Rs 3.07 lakh from Rs 22.55 lakh crore in the fortnight ended Feb 28 to Rs 25.62 lakh crore in the fortnight ended June 19, 2020. Between March and June 2020, people withdrew cash heavily from bank branches and ATMs in the wake of lockdown and as dependence on cash transactions rose.
While the currency with public has been rising, its pace slowed since July, before gathering momentum once again in February 2021. Since February 2021, it has risen by Rs 96,776 crore.
By comparison, the rise in currency with public between December and January was only Rs 33,500 crore. Also in the three month period between July and September 2020, the rise in currency with public was Rs 22,305 crore. A jump was, however, seen in the festive moths of October and November as the currency with public rose by Rs 88,300 crore between the fortnight ended October 9 and November 20, 2020.
According to the RBI, currency with the public is arrived at after deducting cash with banks from total currency in circulation. Currency in circulation, which includes notes in circulation, rupee coins and small coins, refers to cash or currency within a country that is physically used to conduct transactions between consumers and businesses. So, it effectively means the currency that individuals across the country hold with themselves.
It is, however, important to note that the currency with public has jumped by Rs 10.06 lakh crore or 56 per cent since the government announced demonetisation on November 8, 2016. As on November 4, 2016, the currency with public stood at Rs 17.97 lakh crore and currently it amounts to Rs 28.03 lakh crore.
One of the reasons the government cited for the demonetisation was to make India a less cash society. While the government and RBI pushed digitization of payments and slapped restrictions on the use of cash on various transactions, the each with public continues to rise.
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