Currency in Circulation (CIC) declines in the first half of financial year, marking unprecedented H1 decrease in a decade. During the first half of the previous two financial years, the CIC experienced an increase of Rs 33,357 crore in FY23 and Rs 84,978 crore in FY22. This year, there has been a significant decline primarily due to the withdrawal of Rs 2000 banknotes, which was announced on May 19, 2023.
A total of Rs 3.46 trillion worth of Rs 2000 notes have been returned, which accounts for 96 percent of the total of Rs 3.56 trillion worth of Rs 2000 notes that were in circulation until May 19, 2023. This implies that although the Reserve Bank of India injected Rs 2.69 trillion between April and September, the CIC decreased because the amount injected was less than the amount withdrawn. Out of the total Rs 2000 banknotes that were returned, only 13 percent were exchanged, while the remaining amount was deposited in bank accounts. The notes were subsequently transferred to the vault of the RBI.
After depositing Rs 2000 notes in banks, individuals have subsequently withdrawn significantly smaller sums of money. This is due to the fact that individuals no longer rely on physical currency for transactions as they did in the past. Digital transactions prevent a significant impact on the economy despite withdrawals. Due to the increasing prevalence of digital transactions, the growth rate of the currency in circulation has declined over the past few years. In fact, the growth of CIC was in single digits during FY23 and FY22, which is in contrast with the growth rates observed in previous years.