Mystery $9b in cash with Indians
Withdrawals of about Rs600b more than Rs9.1tr in circulation as of January 13
India’s unprecedented ban on high-denomination currency bills has led to a mismatch in cash supply that has flummoxed some economists and data crunchers.
Indians withdrew about Rs600 billion (Dh32.43 billion, $9 billion) more than the Rs9.1 trillion of currency in circulation as of January 13, according to a report submitted by the Reserve Bank of India to a parliamentary panel on Wednesday. A copy of the document was seen by Bloomberg News.
“This is usually not the case,” said Sujan Hajra, chief economist at Anand Rathi Securities Ltd. in Mumbai, who was a director at the RBI from 1993-2006. He added that cash with public should be lower than currency in circulation “but then you don’t have demonetisation usually.”
Clarity will emerge only once the central bank reconciles and publishes final figures, he said.
Invalidated bills
The RBI’s spokeswoman declined to comment. The central bank has refused to share the amount of invalidated bills that have been deposited and said on January 5 that it is still counting the notes to eliminate errors. Data published January 20 show that notes in circulation as of January 13 was Rs9.3 trillion and currency with public on December 23 was Rs7.8 trillion.
In a shock move late on November 8, Prime Minister Narendra Modi cancelled Rs15.4 trillion of the Rs17.7 trillion in circulation and pledged to swap the worthless notes with fresh bills. Between November 9 to January 13, the RBI printed about Rs5.53 trillion of new notes and put in circulation 25,197 million bank notes aggregating Rs6.78 trillion, taking total currency in circulation to about Rs9.1 trillion, according to the RBI’s document on Wednesday. As on January 13 the public had withdrawn close to Rs9.7 trillion from bank counters and cash-dispensing machines, the document said.
This exercise has been described as the world’s most sweeping currency policy change in decades, leaving the central bank with a pile of junked notes 300 times the height of Mount Everest.