A man holds the demonetised Indian five hundred rupee banknotes for exchange outside a State Bank of India branch in New Delhi. (Photographer: Anindito Mukherjee/Bloomberg)

99.3% Of Demonetised Money Returns To RBI, Report Shows

Almost all of the demonetised currency notes have been counted and accounted for by the Reserve Bank of India (RBI), the central bank said in its annual report for the year 2017-18 on Wednesday.

According to the report, Rs 15.31 lakh crore worth currency notes have now been returned, since November 8, 2016. This represents about 99.3 percent of the total currency notes which went out of circulation on a single day. When Prime Minister Narendra Modi announced the demonetisation of Rs 500 and Rs 1,000 denominated currency notes, the total value of these high value currency notes in circulation was Rs 15.45 lakh crore.

At the time of demonetisation, it was felt that a significant amount of the demonetised currency would not return to the system. This would, in effect, imply that some part of the stock of unaccounted for money (black money) would be extinguished. Contrary to that expectation, most of the demonetised currency returned to the system.

The RBI had first put out this data in its annual report last year. However, at the time it had put in a caveat to say that the currency returned still needed to go through a final round of checks.

The difference between the outstanding currency notes in circulation before demonetisation and the currency notes returned to the RBI, which stands at Rs 10,720 crore, has been shifted to the central bank’s ‘Other Liabilities and Provisions’ segment. This amount was earlier a part of a liability head called ‘Notes issued’, the RBI said.

Also read: Hard Earned Macroeconomic Stability Must Be Preserved, Says RBI

Contribution Of High Denomination Notes

Another perceived benefit of demonetisation was to bring down the proportion of high denomination notes.

However, high value notes now are only marginally lower than pre-demonetisation.

In value terms, the share of Rs 500 and Rs 2,000 banknotes, which had together accounted for 72.7 percent of the total value of banknotes in circulation at end-March 2017, increased to 80.2 percent as at end-March 2018, the annual report said.

Prior to demonetisation, Rs 500 and Rs 1000 notes accounted for 86 percent of the currency in circulation.

The value of banknotes in circulation increased by 37.7 percent over the year to Rs 18.04 lakh crore as at end-March 2018. The volume of banknotes, however, increased by 2.1 percent.

Currency In Circulation

According to the RBI’s annual report, currency in circulation had surpassed the level seen before demonetisation by March 2018.

As on March 31, 2018, currency in circulation was at 101.8 per cent of its pre-demonetisation level. However, it works out to around 88 percent of its underlying 3-year trend had there been no demonetisation, said the RBI.

As a percentage of GDP, currency in circulation moved back to 10.9 percent, said the central bank. In 2015-16, this ratio was at 12.1 percent.

India’s currency to GDP ratio moved up to 10.9 per cent in 2017- 18, returning to being amongst the highest levels of currency usage in peer emerging market economies (EMEs) and advanced economies (AEs) as well.
RBI Annual Report

The RBI added that the use of digital payments, which had surged to a peak in December 2016 in the aftermath of demonetisation, fell back to the elevated post-demonetisation trend before rising in recent months.

99.3% Of Demonetised Money Returns To RBI, Report Shows