New Delhi | An SBI study on Tuesday said the withdrawal of Rs 2000 currency note is likely to be a non-event but it will have a favourable bearing on liquidity, bank deposits and interest rates.
The 131-day window to exchange junked 2000 rupee currency notes opened on Tuesday with a mixed bag of small queues and confusion at some banks over the requirement of officially valid identity cards like PAN or Aadhaar, and official forms.
Unlike November 2016, when old 500 and 1000 rupee notes - constituting some 86 per cent of the currency in circulation - were banned overnight, resulting in sarpantine ques outside bank branches across the country, this time no crowding is being witnessed.
The SBI's research report 'Ecowrap' expects that almost the entire amount of Rs 3.6 lakh crore in the form of Rs 2000 will come back to the banking system (the report assumes 10-15 per cent of the total Rs 2000 notes are in currency chests).
"Even though the impact of Rs 2000 rupee note withdrawal is a non-event, there will be a favourable impact on liquidity, bank deposits and interest rates.
"Decoding exchange/deposit dynamics, we understand, banks will already be holding some of these notes in their currency chests, thus the impact on deposits will be limited," it said.
Ecowrap further said in digital payments, India has been witnessing new milestones, in both value and volume terms, which indicate the robustness of its payment ecosystem and acceptance by a wide stratum of consumers.
"If we look at the 'total digital payments' per cent of nominal GDP, it has increased to 767 per cent in FY23 from 668 per cent in FY16," it said.
The retail digital payments (excluding RTGS) as per cent of GDP reached 242 per cent in FY23 from 129 per cent in FY16.
Among all, UPI has emerged as the most popular and preferred payment mode in India pioneering Person to Person (P2P) as well as Person to Merchant (P2M) transactions in India accounting for about 73 per cent of the total digital payments, the report said.
The volume of UPI transactions has increased multi-fold from 1.8 crore in FY17 to 8375 crore in FY23. The value of UPI transactions has also increased handsomely, from just Rs 6,947 crore to Rs 139 lakh crore during the same period, a jump of 2004 times.
The report further said currency in circulation has moderated to reach 12.4 per cent of GDP in FY23, almost same level as 2015-16.
The Rs 2000 notes constitute around 10.8 per cent of total currency in circulation or Rs 3.6 lakh crore. The notes can be exchanged or deposited till September 30, 2023.
Compared to demonetization, this time the quantum of currency being withdrawn is significantly smaller and the period to complete the process is more spread out.
During the November 2016 demonetization, 86 per cent of the currency in circulation was withdrawn with old 500 and 1000 notes ceasing to be legal tender. The entire process was completed over a shorter 50-day time period.