Demonetisation happened, and then, Indians got back to cash; currency savings at multi-year high, shows RBI data

By: |
Updated: August 30, 2018 1:45:56 PM

In 2016-17, Prime Minister Narendra Modi announced demonetisation of high-value notes. In the following financial year, 2017-18, savings in currency by households spiked to at least six-year high.

Demonetisation happened, and then Indians got back to cash; currency savings at multi-year high, shows RBI data (Image: Reuters)

In 2016-17, Prime Minister Narendra Modi announced demonetisation of high-value notes. In the following financial year, 2017-18, savings in currency by households spiked to at least six-year high, while deposits fell to at least six-year low, data available in RBI’s annual report showed.

The percentage of savings in currency in FY18 increased to 2.8% of the Gross National Disposable Income (GNDI) from 1.8% in FY16, before dipping to -2% in FY17, which was the demonetisation year. On the other hand, deposits, which was 4.6% of GNDI in FY16, spiked to 6.3% in FY17 but fell to 2.9% in FY18, RBI data showed.

Data: RBI annual report (Savings as percentage of GNDI)

Meanwhile, the data also showed that the share of savings through provident and pension funds did not change. Percentage of savings via provident and pension funds was 2.1% in FY16, which fell to 2% in FY17, and rose again to 2.1% in FY18.

“Household financial saving – the most important source of funds for investment in the economy declined to 6.7 per cent of GNDI in 2016-17, down from 8.1 per cent in 2015-16,” the RBI report noted.

Credit: RBI annual report

The RBI report also showed that 99.3% of demonetised notes came back to system, leading to a political slugfest, in which questions are being if asked it was an ill-conceived move or a move that failed to deliver completely. Former finance minister P Chidamabaram even claimed that demonetisation led to a loss of Rs 2.25 lakh crore.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Next Stories
1Kerala set to see sharp decrease in tourist arrivals in Q2 due to floods
2Surplus distribution: RBI transfers Rs 50,000 cr to govt in FY18
3Current account deficit expected to be largely financed by FDI flows