Data crunching: Has Rs 9.2 lakh cr of new currency been issued to public?

Reports of what transpired in the parliamentary standing committee on finance on Wednesday have only added to the confusion over how much of the banned currency has been remonetised by the Reserve Bank of India (RBI).

According to reports, Urjit Patel, governor of RBI, told the committee Rs 9.2 lakh crore of new currency had been issued so far. This figure is at odds with RBI’s most recent data on currency in circulation. 

According to a RBI press release, total currency in circulation stood at Rs 9.5 lakh crore as on January 13. This includes currency with the public as well as cash on hand with banks. 

On November 8, when the government withdrew the legal tender status of Rs 500 and Rs 1,000 notes, it withdrew 86 per cent of the currency from circulation.

The remaining 14 per cent, which consists of small denomination notes and coins, was not demonetised. This 14 per cent amounts to roughly Rs 2.5 lakh crore.

As this amount was not demonetised, it is only logical that it will be part of the current currency in circulation figures. 

So, of the Rs 9.5 lakh crore of currency in circulation on January 13, Rs 2.5 lakh crore is likely to be of small denomination notes.

This leaves a balance of roughly Rs 7 lakh crore that could be the maximum amount of new currency notes in circulation and not the Rs 9.2 lakh crore that Patel is reported to have told the parliamentary panel. It is also possible that RBI may have pumped in smaller denomination notes post-November 8, in which case this figure could well be lower. It is likely the figure of Rs 9.2 lakh crore Patel referred to is, in fact, the total money in new currency notes that has been printed so far.

“It is possible the governor has given the figure of what has been printed and available at the currency chests,” says Soumya Kanti Ghosh, group chief economic advisor at State Bank of India. Other analysts concur. 

“The discrepancy could be on account of the fact that Rs 9.2 Lakh crore worth of currency is printed. Some part may be in currency chests and not in circulation. Patel’s statement is talking about currency printed which may include some part which is not in circulation,” said another economist. 

On Wednesday, both Shaktikanta Das, economic affairs secretary, and Urjit Patel are reported to have told the parliamentary committee that the government has been discussing the issue of demonetisation with the RBI since early 2016. 

Sources said that as this discussion would have taken place during the tenure of the then RBI governor Raghuram Rajan, members of the committee asked the government to share his views on the issue.