Cash withdrawal from banks falling at faster pace after demonetisation

Since demonetisation, cash withdrawal has been falling at a faster rate. It has gone down to  Rs 32,500 crore in the week to March 24 from a peak of Rs 52,800 crore for the week ended January 13, says a report.

According to SBI research report Ecowrap, even in the span of one week (between March 17 to 24), cash withdrawal has declined by Rs 2,000 crore.

The report said the decline in cash withdrawals is “intriguing” even as limits on withdrawals were removed completely from March 13.

Moreover, with implementation of ban on cash transactions of over Rs 2 lakh from April 1, further decline in cash withdrawal may be a possibility.

The report did not cite any solid reason for the decline, but said strict monitoring on cash withdrawal and shift to digital payment could be an explanation.

Also read: Companies asked to disclose details of junked notes transactions during demonetisation period

“While it may be difficult to ascribe a reason, our estimates indicate that there would be a permanent liquidity injection of least Rs 1.7 lakh crore or 1.1 per cent of GDP post demonetisation,” the report said, adding that this data are a reflection of the extent of formalisation of the economy.

This declining trend in cash withdrawal will also have repercussions on RBI liquidity management policy, the report added. 

Also read: RBI denies reports of introducing new denomination notes as of now