India Covid-19 lockdown: Cash with public up by Rs 1.63 lakh crore in 2 months

The Indian Express
June 4, 2020

The extension of the lockdown and the rising number of COVID-19 infections seem to have pushed the country towards a more cash-driven economy. Even though state governments have started relaxing retail trade restrictions, the relentless rise in currency with the public is continuing with people taking out cash worth another Rs 39,028 crore during the fortnight ended May 22.
Currency with the public has now risen by Rs 1,63,135 crore from April 1 this year to Rs 25.12 lakh crore as of May 22. According to data released by the Reserve Bank of India (RBI) on Wednesday, currency with public has gone up by 18.7 per cent, or Rs 3,95,484 crore, on a year-on-year basis as against Rs 2.63,573 crore, or 14.2 per cent, in the previous year.
With the lockdown continuing, people’s reliance on cash is expected to rise further in the next one or two months. However, the pace of the growth has come down from the March and April levels. As per the RBI definition, currency with the public is arrived at after deducting cash with banks from total currency in circulation. On the other hand, currency in circulation refers to cash or currency within a country that is physically used to conduct transactions between consumers and businesses.
The rise in the currency with public comes despite appeals by the government and the RBI to use digital payment tools amidst coronavirus outbreak. In fact, the currency in circulation has been rising sharply since the beginning of March when the virus started spreading across the US and Europe and fresh cases were also reported in India.
RBI data shows that since February 28, currency with the public has showed an average fortnightly increase of close to Rs 40,000 crore. By comparison, in the 12-month period between March 1, 2019 and February 28, 2020, currency with the public had risen by Rs 2.28 lakh crore, or an average fortnightly increase of Rs 8,435 crore.
Bankers say that people have been withdrawing more and more cash and as the dependency on neighbourhood grocery stores has gone up, so has the requirement of cash. As states have now relaxed curbs on the functioning of retail and e-commerce sales, the dependence on cash will eventually come down, said a banking source. In fact, the latest data shows a decline in the pace. During the fortnight ended May 8, currency with public rose by Rs 49,410 crore.
On the other hand, bank credit to the commercial sector has been declining in spite of the reduction in interest rates by the RBI. During the fortnight ended May 22, bank credit to the commercial sector fell by Rs 29,651 crore and by Rs 1,63,774 during the period April 1 to May 22.
The RBI had cut the repo rate by 75 basis points on March 27 to boost credit offtake and many banks had partially passed on the benefits. Interestingly, after a surge in the previous months, time deposits (FDs) have showed a decline of Rs 22,053 crore during the fortnight ended May 22.

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