The withdrawal of Rs 2,000 banknotes raised bank deposits by Rs 3.3 lakh crore, about 80 per cent increase of which is in term deposits like FD, during the first 15 days of the announcement of the RBI’s decision to withdraw the high-value notes, according to an SBI report. It also said the withdrawal of the Rs 2,000 notes has also pushed loan repayment and consumption demand.
“Though some amount would be withdrawn following the deposit but going by the current trends, CASA deposits are likely to increase (Rs 1.5 lakh crore) due to this measure. ASCB data shows that there has been an increase in total deposits of Rs 3.3 lakh crore (81 per cent increase of which is in term deposits) during the fortnight ended June 2, 2023. However, there is some seasonality in the data,” State Bank of India said in the report.
The RBI had decided to withdraw Rs 2,000 banknotes from circulation on May 19, 2023.
SBI said the average increase in deposits during the same fortnight in the last two years was around Rs 1.5 lakh crore. Thus, taking that also into account, banks may have received additional deposits of around Rs 1.8 lakh crore during the fortnight this year.
It seems corporates, flush with in-hand liquidity, are parking the additional funds with banks. “This is also substantiated by the fact that some of the sectors which reported improved cash and bank balance as of March 2023 as compared to March 2022 includes refinery, oil & gas, power, chemicals, etc., are believed to be more active in parking of funds with banks that ranges from 30-45 days to 1 year,” SBI said.
On credit front, the report said 30 per cent of deposits (or Rs 92,000 crore) might go for loan payment (in CC/OD and in term loan accounts also). “Interestingly, despite repayments getting frontloaded, credit growth continues to remain quite strong.”
On consumption, the state-owned bank said one of the major benefits of withdrawal of Rs 2000 note might be the immediate uptick in consumption demand. “As per our estimate consumption demand may be frontloaded by Rs 55,000 crore.”
“Though the RBI asked customers to deposit or exchange the Rs 2000 notes, but it is expected that high-value amounts could move to high-value spends such as gold/jewellery, high-end consumer durables like AC, mobile phones etc, and real estate,” SBI said.
It said around Rs 55,000 crore could be withdrawn by public from Rs 92,000 crore saving bank deposits to be made cumulatively through Rs 2,000 notes. This should give consumption boost along with increasing the velocity of money.
The 2000 denomination note, which the RBI had stopped printing since 2018, reduced to 1.8 billion pieces as on March 2023, from 2.1 billion pieces in March 2022. In value term, the share of 2,000 denomination notes (Rs 3.62 lakh crore) was at 10.8 per cent as on March 2023, while the share of small denomination notes came down further to 8.3 per cent by end March 2023 from 9 per cent a year earlier.
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