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The currency in circulation had jumped by over Rs 4 trillion in 2020-21, while the increase tapered to Rs 2.80 trillion in the last financial year
India’s currency in circulation has increased by only around Rs 500 billion in the first four months of this financial year, which is nearly half the pace of the same period a year ago.
“Economic activity is completely back to pre-pandemic levels, and hence there is hardly any need for panic-driven cash withdrawals, which is leading to a drop in cash in circulation,” a trader with a state-run bank said.
The rise in the cash in circulation for April-July stood at Rs 508 billion ($6.38 billion), as compared to Rs 928 billion for the similar period last year and a mammoth Rs 2.25 trillion in 2020-21, the peak of lockdown, data from the Reserve Bank of India showed. The currency in circulation had jumped by over Rs 4 trillion in 2020-21, while the increase tapered to Rs 2.80 trillion in the last financial year, and market participants expect another drop in the current year.
Meanwhile, India’s banking system liquidity surplus remains around Rs 2 trillion, and Kotak Mahindra Bank expects the surplus to ease to around Rs 1.50 trillion by the end of this week.