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LATEST NEWS UPDATES | First Time in 20 Years, Currency in Circulation Declines in a Busy Diwali Week: SBI

First Time in 20 Years, Currency in Circulation Declines in a Busy Diwali Week: SBI

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published Published on Nov 3, 2022   modified Modified on Nov 6, 2022

-The Telegraph

In a remarkable development, for the first time in 20 years, currency in circulation (CIC) declined during Diwali week. With the increased acceptance of digital payments in the country, over-reliance on cash is slowly fading away. Over the years, the Indian cash-led economy has now changed to a smart-phone led payment economy, says a research note.
 
In the report, Dr Soumya Kanti Ghosh, group chief economic adviser of State Bank of India (SBI), says, "A lower currency in circulation also is akin to a cash reserve ratio (CRR) cut for the banking system, as it results in less leakage of deposits and it will impact monetary transmission positively. The increasing usage of pre-paid instruments (PPIs, also a part of e-money) has the potential to impact the measure of monetary aggregates. For example, if a consumer prefers to use e-money or PPI in the case of India vis-à-vis currency, then for a given stock of currency, the money multiplier might decline."
 
With the increase in digital transactions, this is the first time after 2002 that currency in circulation during the Diwali week shows a decline, assuming that the marginal decrease in 2009 was purely because of economic slowdown, SBI says.

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The Telegraph, 3 November, 2022, https://www.moneylife.in/article/first-time-in-20-years-currency-in-circulation-declines-in-a-busy-diwali-week-sbi/68788.html


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