The first two weeks of the lockdown period has seemingly pushed the country more towards cash-driven instead of adopting digital payments as urged by Prime Minister Narendra Modi and RBI Governor Shaktikanta Das, The Indian Express reported. During the first fortnight, the share of money in the form of currency being held by banks and the public, hit the highest level since 2007-08. The increase in the level is being ascribed to weak credit-cum-deposit creation by banks in a slowing economy and people’s desire to have cash amid the lockdown period and the looming economic distress.
As on April 19, the total currency in circulation, which includes the outstanding value of coins and notes issued by the Reserve Bank of India (RBI), was Rs 25.06 lakh crore. This was 14.5 per cent up from a year ago and also 39.4 per cent more than the Rs 17.97 lakh crore level of November 4, 2016 — just before demonetization. Also, it is 2.8 times the Rs 8.98 lakh crore low as on January 6, 2017.
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According to banking sources, following the three-week lockdown announced by the Prime Minister on March 24, people withdrew cash as the local mom and pop shops became the most reliable for their grocery purchases even as e-commerce deliveries were restricted to essential goods. Many people are withdrawing cash from ATMs as a reserve for personal needs, bankers added.
Moreover, as the government restricted public gatherings and travel amid lockdown, to control the Coronavirus spread, seemed to have also contributed to people accumulating cash and making more than normal withdrawals from banks/ATMs as a precautionary measure. In fact, according to sources, as reported by The Indian Express, grocery shops are preferring cash saying they need to pay their vendors in cash. A banker said that while the retailer seeks cash to pay the distributor, the latter wants cash to pay to suppliers. It’s mostly a cash economy at the ground level during the lockdown, he said.