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09 May 2017

Demonetization - Cash making a comeback

Demonetization: Cash withdrawal levels normalizing

Data from the Reserve Bank of India have indicated that cash withdrawal levels for March 2017 were 0.6% higher than that of last year, suggesting that cash withdrawal levels from ATMs have normalized.

However, the rate of growth of withdrawals is much lower compared to previous years.

Some analysts say the return of pre-demonetization cash withdrawal levels suggests a return to the cash economy.

In context

Demonetization: Cash withdrawal levels normalizing
Shortage of cash continues


Shortage of cash continues

Analysts stated that after demonetization, Rs. 15.4 trillion was pulled out of the system, and the whole amount has not yet been reintroduced into the system.

Statistics indicated that several ATMs in the country are yet to return to normal operational levels.

Officials from the Cash Logistics Association said only 60% replenishment has taken place with the current cash supply.


Has digitization not worked?

In the aftermath of demonetization, the Modi government made a significant push for digital transactions by promoting digital payments, e-wallets and offering incentives for using cashless transactions.

The return to pre-demonetization ATM withdrawal levels suggests that people may not have fully moved toward digital payments yet, and that the cash economy is still a prevalent trend.

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Analysts say people returning to cash economy

Economists who analyzed the data said, "March trends show that people are getting back to their old habit of using cash and the withdrawals have touched the same level despite restrictions and inadequate cash supply."

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