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Cash usage remains strong during covid

Maharashtra & Karnataka account for 40% of country’s transactions; Maharashtra for 25%:


The cash in circulation (CIC) is the total of cash with banks and currency with the public. The CMS Cash Index, created to track inflows and outflows of currency, has become, over time, a valid measure of the commerce and economic health of the country, at any given point. This index reflects the ebb and tide of commerce, the peaks of festivals and wedding seasons, of pay days, of recessions and crisis events in India. The primary CMS Cash Index is a weighted index, consisting of 2 factors, the cash that goes into circulation via the CMS ATM channels and cash that the company collects from the retail channels, which stands in as proxy for consumption patterns by state and sectors. The analysis is based on data gathered from 15,000 pin codes across India.

CIC to reach Rs41.5 tn by FY25

Anush Raghavan, President, CMS Cash Business, CMS Info Systems, explains: “The cash in circulation has grown by 19.8% between March 2020 and March 2021 to Rs28.4 trillion. During the Diwali festive season in 2021, CMS Cash Index has shown a 10% growth month on month – Sept to October. It is expected to continue to grow at approximately 10% to reach Rs41.5 trillion by FY25. Moreover, the CMS Cash Index is back to pre-covid levels of Feb 2020 despite the reduction in economic activity. During the festival season in October 2021, we have seen an increase of 10% m/m in the CMS Cash Index.”

Big Deposit Bulge In 24 Yrs

As per the RBI data for the fortnight ended 19 November 2021, ASCB’s (all scheduled commercial banks’) aggregate deposits have slumped by Rs2.7 trillion during the fortnight. The slump in deposits follows an abrupt increase by Rs3.3 trillion during the previous fortnight ended Nov 5, 2021. Interestingly, such growth in deposits was around 36% of the incremental deposit growth at that point of time.

According to Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India, this increase in deposits and subsequent slump is quite a contrarian trend. While it may be exactly difficult to decipher the increase and subsequent decline, it does poses questions on liquidity management/financial stability or a shift in behavioral trend in customer payment habits through digitization and hence lower currency leakage and concomitant deposit bulge or both. First, the fortnightly increase of Rs3.3 trillion. This has never happened during a Diwali week as there is always a currency leakage and concomitant deposit decline.

This is also the 5th largest increase in any fortnight in the last 24 years. Such huge incremental addition has happened only a few times, with higher deposits accretion (than the current year’s fortnight) occurring during the fortnight ended 25 November 2016 (Rs4.16 trillion), 30 September 2016 (Rs3.55 trillion), 29 March 2019 (Rs3.46 trillion) and 1 April 2016 (Rs3.41 trillion). However, increase in November 2016 was because of demonetization and the March and April fortnightly increases could be attributed to seasonal year-end bulge.

Next, the fortnightly deposit slump in the subsequent fortnight. Ghosh believes that it is possible that there was a large influx of deposits into banking system for the fortnight ended 5 Nov 2021 in anticipation of a build-up in rally in stock markets post primary issuances of new age companies and others. However, when such rally did not materialize, the bulge in banking deposits slumped and almost 80% of deposit bulge was withdrawn. The deposits growth has decelerated in Q2 as compared to Q1, particularly in rural areas indicating that the current economic recovery is mostly urban led and rural economy is still recouping.

The recent increase and swift slump of deposits in the subsequent fortnight clearly points out that liquidity management cannot be divorced from market microstructure. The market microstructure affects decision-making at the micro stage and price discovery at the macro stage.

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