India's currency in circulation has increased by only around 500 billion in the first four months of the financial year, which is almost half the pace of the same period a year ago.
Economic activity is back to pre-pandemic levels, and there isn't a need for panic-driven cash withdrawals, which leads to a drop in cash in circulation, a trader with a state-owned bank said.
In April-July, the cash in circulation increased to Rs 508 billion $6.38 billion compared to Rs 928 billion in the same period last year and a mammoth Rs 2.25 trillion in 2020- 21, the peak of the lock-down, according to data from the show. The currency in circulation had increased by over 4 trillion in 2020 -- 21, while the increase was tapered to 2.80 trillion in the last financial year, and market participants expect another drop in the current year.
India's banking system liquidity surplus remains around 2 trillion and Kotak Mahindra Bank expects the surplus to be around Rs 1.50 trillion by the end of the week.