Cash crunch to disappear slowly depending upon higher denomination note printing

The cash crunch that is engulfing the economy is expected to faded out only slowly. According to the RBI data, the system has only one third of the total value of required currency notes right now.

As against a monetary base of Rs 15.6 lakh crore currency supply, including the small denomination notes, only Rs 5.92 crore is in circulation. This includes the new Rs 2000 and Rs 500 notes and smaller denominations.

This means that the physical cash dominated transaction economy may be reactivated only by the second half of this calendar year. The phasing out of currency crunch depends upon the pace of Rs 500 note printing

On the timeline date for taking the next step on liquidity relief, the RBI raised daily withdrawal limit to Rs 4500 from the existing Rs 2500. The step is not expected to no change as withdrawal limit of Rs 24000 still in place.

The PM who initially promised a 50-day difficulty has not mentioned anything about physical cash restriction removals; understandably because of the time needed in currency printing.

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Tags : monetisaiton