Updated: May 27, 2021 11:16:33 am
As public rushed to withdraw cash for their daily needs and to meet any medical exigency amid the lockdown and curfews across states, the currency with public rose and hit an all-time high in the fortnight ending May 7, 2021.
According to data released by the Reserve Bank of India (RBI), in the fortnight ending May 7, 2021, the currency with the public rose by Rs 35,464 crore to hit an all-time high of Rs 28.39 lakh crore. Over the last 14 months, since coronavirus started spreading in India since March 2020, currency with the public has grown by over Rs 5.3 lakh crore.
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How much has it grown?
While the currency with the public has been rising over the last 14-month period, since the pandemic broke out, its pace slowed after July 2020, in one with decline of cases. It however gathered momentum in February 2021 as the cases started rising.
Between March 1, 2021 and May 7, 2021 the currency with the public has risen by Rs 1.04 lakh crore to hit an all-time high of Rs 28.39 lakh crore in the fortnight ended May 7, 2021.
Earlier, in the period between March 1, 2020 and June 19, 2020, the currency with public had risen sharply by Rs 3.07 lakh crore 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 as dependence on cash transactions rose.
In comparison, in the period between July and September 2020, the rise in currency with public was Rs 22,305 crore and that between December and January was only Rs 33,500 crore. In the festive months of October and November, however, the currency with public had risen by Rs 88,300 crore.
Since the government announced demonetisation on November 8, 2016, the currency with public has risen by 10.4 lakh crore or 58 per cent. As on November 4, 2016, the currency with public stood at Rs 17.97 lakh crore.
Why is it rising ?
Traditionally, it has been seen that an uncertain environment leads to increase in cash holding by public. As the second wave of coronavirus pandemic started spreading and daily fresh cases rose exponentially from around 1 lakh in first week of April to upwards of 4 lakh in the first week of May, general public grew apprehensive about announcement of stringent lockdown by the central government to control the spread of Covid-19. If that was one reason for people rushing to withdraw cash, many individuals are withdrawing cash to meet any urgent cash requirements in case of a health emergency in the current times.
While state governments initially started with night curfews and weekend lockdowns, the rise in cases forced them to extend the lockdowns and make it more stringent forcing people to hold cash to meet their daily needs.
Some bankers say that in many cases as people have lost jobs or have seen a cut in their salaries, they are dipping into their savings in banks to meet their monthly expense and that is also leading to rise in currency with public.
Is it expected to rise further?
As the pandemic continues to impact lives and create uncertainty, economists feel that there could be further rise in cash holdings. Some say that at least over the next couple of months, the cash holdings may remain at an elevated levels as people want to keep cash with them for any medical emergency or any other contingency that may arise.
RBI data shows that the currency with public has been rising steadily over the years. While one of the reasons, the government cited, for the demonetisation was to make India a less cash society, the cash holding has increased by 58 per cent since then.
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