People are depositing more in banks than changing 2000 rupee note, what is the reason

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Explainer: 2000 के नोट सर्कुलेशन से बाहर होने से सरकार और बैंकों को होगा फायदा, 3.62 लाख करोड़ पर होगा असर

This is how people living abroad can change 2000 note

Last month, RBI had announced to withdraw Rs 2000 note. This process has started from May 23, which will continue till the last month of September. During this, the common people can either get their Rs 2,000 note changed or deposit it. More than 10 days have passed since then. During this, a huge trend has been seen among those who bring Rs 2,000 notes to the banks.

According to the data released by the banks, instead of exchanging 2000 rupee notes in banks, common people are depositing in banks. After May 23, till now 80 thousand crore rupees of 2000 rupee notes have reached the banks or in other words the banking system. While the Rs 2,000 note is expected to enter the banking system, almost the entire Rs 3.6 crore. Deposit rates are expected to come down with the surplus cash available to the banks. As seen during the demonetisation of 2016.

What was the effect on currency in circulation?

According to RBI data, during the week ending May 26, currency in circulation ie CIC has decreased by Rs 36,492 crore to Rs 34.41 lakh crore. RBI has asked banks to exchange or deposit Rs 2,000 notes from May 23. CIC is expected to decline further in the coming weeks. Currency in circulation refers to the cash or currency held by the public which is used for transactions between physical consumers and traders.

People depositing more than the exchange

At the same time, after bringing 2000 rupee notes in the banks, a different trend has been seen to deal with the banks. As it was expected that people will show more trust in exchange than deposits, but the opposite is being seen in banks. According to State Bank of India Chairman Dinesh Khara, Rs 14,000 crore has been deposited in the accounts. 3000 crore rupees have been exchanged. Bank of India has received Rs 2,000 notes worth Rs 3,100 crore. In which most of the deposits have been made. According to a banking source, in total, banks are expected to receive over Rs 80,000 crore worth of Rs 2,000 notes after the RBI announced the withdrawal of these notes from circulation.

With more than four months left for the September 30 deadline to exchange notes, banks are hopeful that almost the entire amount will be back in the banking system. Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India, says, “We believe that almost the entire amount of Rs 3.6 lakh crore will come back to the banking system.

What will be the impact on liquidity and deposits?

According to the CARE Ratings report, the withdrawal of Rs 2,000 notes could see liquidity of Rs 1-1.8 lakh crore in the June-September period. Comfortable liquidity conditions may bring down short term rates. According to SBI, there will be a favorable impact on liquidity, bank deposits and interest rates. We understand that on decoding the exchange-deposit dynamics, banks will already hold some of these notes in their currency chests, thus limiting the impact on deposits.

Assuming that 10-15 percent of the total Rs 2000 notes are in currency chests, then out of the remaining Rs 3 lakh crore, Rs 2-2.1 lakh crore will be spent by consumers. SBI says that about one lakh crore rupees are deposited in banks. However, looking at the trends so far, banks are likely to deposit more than Rs 1 lakh crore as estimated earlier.

Will there be a surge in cash to be seen in public?

After the government announced the demonetisation of Rs 500 and Rs 1000 notes on November 8, 2016, cash with the public started increasing and is now at a new high. With cash remaining the preferred mode of payment, currency with the public stood at a record high of Rs 33.71 lakh crore in the fortnight ending May 19, 2023, up 270 per cent from Rs 9.11 lakh crore recorded on November 25, 2016. The special thing is that two weeks before this, notes of 500 and 1000 rupees were taken out of legal tender with immediate effect.

According to RBI data, cash with the public had increased by 87.6 per cent or Rs 15.74 lakh crore to Rs 17.97 lakh crore on November 4, 2016, a few days before demonetisation was announced. By May 19, 2023, the year-on-year increase in cash with the public had reached more than Rs 2.50 lakh crore. After demonetisation of Rs 500 and Rs 1,000 notes from the system in November 2016, the currency held by the public, which was Rs 17.97 lakh crore on November 4, 2016, came down to Rs 7.8 lakh crore in January 2017, soon after demonetisation. However, analysts do not expect a big jump in cash with the public after the demonetisation of Rs 2,000 notes.

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