Breaking News

You are here » Indian-Commodity  :  Economy  :  CiC slows down since May on higher fuel prices, RBI's intervention: SBI Research

25-Sep2018

CiC slows down since May on higher fuel prices, RBI's intervention: SBI Research

With higher fuel prices and Reserve Bank of India's (RBI) intervention in forex market, the State Bank of India (SBI) Research in its latest report stated that the currency in circulation (CiC) has seen some slowdown in expansion since May. It added CiC increased exponentially after the note ban in November 2016 under which as many as 99.9% of them returned to the system. As per the report, CiC increased from Rs 9 trillion in January 2017 to Rs 19.5 trillion as of 14 September this year. But since the beginning of May 2018, the same has been in the range of Rs 19-19.6 trillion.

SBI Research said that one possible reason can be people may be cutting back discretionary spending with the recent spurt in fuel prices, mostly in rural areas. It also said the other factor could be to the extent RBI selling dollars directly from its foreign exchange reserves to designated dealers/banks thereby withdrawing rupee resources in return, thus reducing currency in circulation. However, it said such intervention, since taking place between banks, should not have major impact on systemic liquidity. It added that the third reason, though insignificant, could also be RBI replacing soiled notes.

The report further noted that the decline in CiC is a seasonal phenomenon but this time it seems the decline is more than just seasonal and has continued beyond August. The RBI's weekly data for the last 10 years shows a pattern in CiC decline in the last fortnight of every July, which is partly explained by the low cash demand from the agriculture sector. The demand for currency increases after the monsoons as the harvesting begins in October followed by Rabi sowing, eventually giving rise to cash requirement. Besides, the festive season also brings along its natural demand, which gets accentuated with buying of gold, automobiles, increasing the demand for currency.


Related News

View all news

Govt approves new national electronic policy 2019

With an aim to increase electronic manufacturing ecosystem in country, the government has approved a new National Electronic Policy 2019.  The objective of new electronics policy is to create......

Cabinet approves promulgation of amendments in Companies Ordinance 2019

In order to incentivize compliance with law and to extend greater Ease of Doing Business, the Union Cabinet has given green signal to the promulgating an ordinance for companies law amendments. A bill......

RBI to infuse Rs 12,500 crore into system through OMOs to increase liquidity

In order to increase liquidity into the market, the Reserve Bank of India (RBI) said it would inject Rs 12,500 crore into the system through purchase of government securities on February 21, 2019. The......

Top News

View all news

Tata Motors signs LTS agreement with its employees

Tata Motors has signed a long-term wage settlement (LTS) agreement with its employees. Under the agreement, workmen will get a wage rise of Rs 9,000 per month along with other incentives based on performance.......

Canara Bank invites bids from merchant bankers to manage its $350-500 million MTN issue: Report

Canara Bank has reportedly invited bids from merchant bankers to manage its $350-500 million issue of senior unsecured/tier-II capital bonds under its medium-term note (MTN) programme. The issue size may......

Alembic Pharma gets USFDA's nod for Acetazolamide Extended-Release Capsules

Alembic Pharmaceuticals (Alembic) has received approval from the US Food & Drug Administration (USFDA) for its Abbreviated New Drug Application (ANDA) Acetazolamide Extended-Release Capsules, 500......