For the record second consecutive time, the currency in circulation (CIC) dipped during Diwali week, with consumers moving towards digital payments to make their festival purchases, State Bank of India (SBI) said in its latest Ecowrap report.
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The Ecowrap research report revealed that in the festive month of October 2023, UPI increased (month-on-month) by 85.3 crore transactions of Rs 1,36,600 crore in value terms.
“The success of the digital journey is primarily due to the relentless push by the Government to formalise and digitalise the economy. Further, the interoperable payments systems like UPI, Wallets and PPIs have made it simple and cheaper to transfer money digitally, even for those who don’t have bank accounts,” it said.
The report also analysed the movement of currency in circulation during Diwali week for the last 20 years. The CIC witnessed a decline both in 2022 and 2023 by about Rs 7,600 crore and Rs 5,900 crore respectively, even as it rose in 2021 — the year of the Covid-19 pandemic. Earlier, in 2009, there was a marginal decline in CIC during the Diwali week due to the global financial crisis.
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“A lower currency in circulation also is akin to a CRR cut for the banking system, as it results in less leakage of deposits and it impacts monetary transmission positively,” said Soumya Kanti Ghosh, group chief economic adviser, State Bank of India.
“This is a win-win for both RBI and government, as it results in saving of seignorage costs and also a less cash economy. This will also mean all the analysis of currency leakage impacting bank deposits, liquidity estimation now could see a fundamental reorientation in the future,” Ghosh added.
On Wednesday, Reserve Bank of India (RBI)’s data showed that during the week ended November 17, currency in circulation dropped by Rs 5,934 crore to Rs 33.6 lakh crore. This year, Diwali was celebrated across the country on November 12.
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In the current financial year, the currency in circulation has declined by Rs 22,721 crore so far.
