Currency in circulation touches 52-week high as demand surges Read more at: https://economictimes.indiatimes.com/markets/forex/currency-in-circulation-touches-52-week-high-as-demand-surges

 The currency in circulation touched a 52-week high at ₹30.5 lakh crore as of February 11, a year-on-year rise of 8.2% and is over 3% or nearly ₹1 lakh crore more than the ₹29.6 lakh crore seen on August 4, 2021. It had risen to 9.2% YoY during the week ending November 5, 2021, which coincided with the Diwali festivities.

Mumbai: Even as digital modes of banking continue to gain ground, cash very much remains a popular mode of transaction and is accelerating in several states that are heading to the polls.

The currency in circulation touched a 52-week high at ₹30.5 lakh crore as of February 11, a year-on-year rise of 8.2% and is over 3% or nearly ₹1 lakh crore more than the ₹29.6 lakh crore seen on August 4, 2021. It had risen to 9.2% YoY during the week ending November 5, 2021, which coincided with the ..Diwali festivities.

This has led to a two-three fold rise in clients for cash management solutions (CMS) companies and business is surging due to the demand for cash.

It is a trend that currency in circulation has been rising," said Madan Sabnavis, chief economist, Bank of Baroda. "This could be partly due to elections in a few states. But people have also gone back to the precautionary holding of cash on concerns over the rise in omicron infections."

A report by the Reserve Bank of India said despite the rise in digital payments, cash in circulation is expected to grow approximately 10% to touch ₹41.5 lakh crore by FY25.

As a percentage of GDP, the currency in circulation is estimated at 13.5% as of February 4, according to estimates by Kotak Mahindra Bank. At the current levels currency in circulation is still higher than the pre-lockdown levels of 12.03% of GDP as of March 2020, though it touched its lifetime high of 14.5% March 2021, on a low base as the economy contracted by 7.25%.

Leading cash management player CMS Info Systems' cash index shows that historically the ratio of cash in circulation to GDP has stayed at 10-12% until February 2020. It has grown at 19.8% since March 2020, driven by the Covid-19 pandemic. The CMS Cash Index has risen between 9% and 19% over the last three years.