Mystery $9 billion in cash with Indians after Modi’s demonetisation move


Mumbai: |India’s unprecedented ban on high-denomination currency bills has led to a mismatch in cash supply that has flummoxed some economists and data crunchers.

Indians withdrew about Rs60,000 crore ($9 billion) more than the Rs9.1 trillion of currency in circulation as of 13 January, according to a report submitted by the Reserve Bank of India to a parliamentary panel on Wednesday. A copy of the document was seen by Bloomberg.

“This is usually not the case,” said Sujan Hajra, chief economist at Anand Rathi Securities Ltd. in Mumbai, who was a director at the RBI from 1993-2006. He added that cash with public should be lower than currency in circulation “but then you don’t have demonetisation usually.”

Clarity will emerge only once the central bank reconciles and publishes final figures, he said.

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The RBI’s spokeswoman declined to comment. The central bank has refused to share the amount of invalidated bills that have been deposited and said on 5 January that it is still counting the notes to eliminate errors.

In a shock move late on 8 November, Prime Minister Narendra Modi cancelled Rs15.4 trillion of the Rs17.7 trillion in circulation and pledged to swap the worthless notes with fresh bills. Between 9 November to 13,25,197 January million bank notes aggregating Rs6.78 trillion have been put into circulation, taking total currency in circulation to about Rs9.1 trillion, according to the RBI’s document on Wednesday. As on 13 January the public had withdrawn close to Rs9.7 trillion from bank counters and cash-dispensing machines, the document said.