MUMBAI: Will the currency in circulation reach pre-demonetisation levels? That’s the question nagging bankers, economists and the ordinary folk. Going by the pace of printing, complete remonetisation is likely in May, but, there are some who believe the RBI should print less.
As on March 24, the currency in circulation stood at Rs 13.12 lakh crore, or 73 per cent of what existed prior to November, 8. It means, another Rs 4.85 lakh crore needs to be pumped into the system to reach the pre-demonetisation levels.
But, according to SBI Research, there was Rs 2.5 lakh crore excess cash in the system, and considering the growing digital transactions, the wise men at SBI Research assert that it’d be prudent on RBI’s part to avoid printing Rs 1.17 lakh crore.
“In the past few years, currency printing rate was much higher than the country’s nominal GDP growth rate. By conservative estimates, there was an excess cash of at least Rs 2.5 lakh crore prior to demonetisation. So, we think that the RBI shouldn’t print Rs 1.17 lakh crore worth notes,” Dr Sowmya Kanti Ghosh, Chief Economic Adviser, Economic Research Department, SBI told Express.
If this happens, the total currency in circulation after full remonetisation will be Rs 16.8 lakh crore, a notch lower than Rs 17.97 lakh crore. Printing less will also reduce costs by Rs 500 crore to Rs 1,000 crore, not to mention money spent on transporting cash to currency chests.
Effectively, the RBI now needs to print only Rs 1.15 lakh crore worth notes and going by the pace of printing, full remonetisation is just a few weeks away, before April 21 to be precise.
The Centre also seems to be on the same page (to print less), if one were to consider its aggressive push towards cashless transactions. Platforms like the UPI, Bhim app, PoS machines and m-wallets have taken digital payments to a record Rs 2.3 lakh crore, clocking 165 per cent growth over last year.
And once the game-changing Aadhaar Payments Systems -- which eliminates the use of plastic card or smartphones to make payments -- enters the fray, cashless transactions will likely explode, further reducing the need for hard cash. “Digital transactions are expected to increase to `3.5 lakh crore,” explained Ghosh.