Rs 70,000cr shortfall of currency: SBI

MUMBAI: A report by

State Bank of India

has estimated the shortfall of currency in circulation at around Rs 70,000 crore. SBI’s chief operating officer

Neeraj Vyas

on Wednesday said that cash availability in the bank’s ATMs improved in the last 24 hours. “Efforts are being made to improve the cash availability further in a few geographies. Overall issue of less cash should come to normalcy within the soonest possible time,” he said.

While currency with public (excluding currency with RBI) stands at Rs 17.5 lakh crore, an SBI research report has estimated the requirement is at Rs 19.4 lakh crore based on nominal growth in GDP at 10.8% in FY17 and 9.8% in FY18. “Currently currency with public shows a gap of Rs 1.9 lakh crore. The increase in digital modes of payment compensates some part of the existing gap.

The shift to digital modes could be at least Rs 1.2 lakh crore. The apparent shortfall thus could be around Rs 70,000 crore or even less,” said

Soumya Kanti Ghosh

, chief economic advisor, SBI.

According to Ghosh, the reason for the higher demand for banknotes could be on account of the slowdown in income velocity (the number of times banknotes change hands). “Income velocity of currency with public has been on a declining trend in FY18, particularly in the second half. This indicates possibly currency of the higher denomination Rs 2,000 is not getting adequately circulated in the economy,” said Ghosh.

SBI’s internal estimates suggest that in states like Bihar, Gujarat and southern states, the income velocity is far less than the national average. Ghosh said that fear of note scarcity could have been accentuated because of the shift to lower denomination notes in ATMs.

This would result in ATMs drying up faster. “As ATMs have to be replenished more frequently, it can lead to the conjecture that cash is not available,” said Ghosh. In the report, Ghosh said that heightened economic activity beginning Q4 of FY18 has meant that the demand for working capital cycle has changed for the better, resulting in more usage of cash for transactional purposes.