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Demonetisation: Currency supply will be closer to normal by February, says Report

The report said as on December-end, only 44 per cent of the banned currency has been replaced as against the earlier estimate of 53 per cent.

demonetisation, demonetisation banks, bank currency, currency supply in banks, SBI, State bank of India, Banking system, RBI, RBI demonetisation, indian express news The report said things will be closer to normal by February-end as opposed to predictions of the currency swap exercise-linked crisis lasting longer. (File photo)

Currency supply to the banking system will be closer to normal by February-end as opposed to predictions of the currency swap exercise-linked crisis lasting longer, according to a research report from State Bank of India (SBI).

The report said as on December-end, only 44 per cent of the banned currency has been replaced as against the earlier estimate of 53 per cent. One possible reason for this could be that RBI is also printing notes of smaller denominations apart from Rs 500 bills and, hence, the total value getting replaced is lower than projections, though the number of pieces may not, according to Ecowrap, an SBI research report.

“If we assume that the RBI continues to print as it is doing as of now, then by January-end, only about 67 per cent of the currency should get replaced (vis-à-vis earlier estimate at 75 per cent).” By February, at this rate, the RBI could thus print as much as 89 per cent of the total currency, it said.

It, however, said if he the apex bank decides to shift its printing more towards smaller denomination, this number could be close to 80 per cent. The report said things will be closer to normal by February-end as opposed to predictions of the currency swap exercise-linked crisis lasting longer. “If this is the case, the possibility of GDP bounce back faster than anticipated may not be ruled out.”

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In any case, a lower growth this year will give the government significant advantage next year due to a lower base, it added.

The SBI report said the Reserve Bank is unlikely to cut repo rate in the February review meeting due to the prevailing global uncertainties and it’s stance may continue to be accommodative next year as inflation is expected to remain benign.

First published on: 06-01-2017 at 02:17:55 am
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