Bank account openings jump, deposits fall on remonetization – Since end-December 2016, currency in circulation rose by Rs 2.60 lakh crore, says RBI paper
Remonetization has been progressing at a fast pace, according to the data given out by Reserve Bank of India (RBI).
Between end-December 2016 and early March 2017, there was a net increase in currency in circulation by about Rs 2,60,000 crore, according to a paper on demonetization released by the central bank. During this period, deposits with banks also declined moderately as cash withdrawals increased after government lifted restriction on cash withdrawals.
All restrictions on cash withdrawals are lifted effective March 13.
The paper also revealed data on the Jan Dhan accounts but did not reveal data on the total number of bank accounts opened or the total money that got deposited into these accounts.
Post-demonetisation, 23.3 million new accounts were opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY), bulk of which (80%) were with public sector banks according to a paper on demonetization released by the RBI. Of the new Jan Dhan accounts opened, 53.6% were in urban areas and 46.4% in rural areas. Deposits under PMJDY accounts increased significantly post demonetization according to the RBI study. The total balance in PMJDY deposit accounts peaked at Rs 74,600 crore as on December 7, 2016 from Rs 45,600 crore as on November 9, 2016 – an increase of 63.6 %.
According to bankers, there was a spurt in the normal savings bank accounts as well. For example, SBI was opening 1 crore accounts daily for November and also in December 2016 which included both the Jan Dhan and the ordinary savings accounts.
The government also capped deposits into PMJDY accounts at Rs 50,000 on November 15, 2016. Although deposits declined to Rs 64,300 crore as on March 1, 2017, they were still higher by 41 % over the level of November 9, 2016. Jan Dhan accounts contributed 4.6 % in total accretion of aggregate deposits of SCBs in the post-demonetisation
The deposit Bulk of the deposits so mobilised by SCBs have been deployed in in government bonds and corporate bonds. "Additional deposits mobilised by commercial banks have been largely deployed in liquid assets. This may be due to the expected transitory nature of the bulk of such deposits and weak demand as reflected in the subdued growth of credit," the RBI paper added.
Decline in currency in circulation on account of demonetisation led to a surge in bank deposits. The demonetised notes were accepted at bank counters till December 30, 2016. Between October 28, 2016 and January 6, 2017 (i.e., days immediately prior to and after demonetisation for which fortnightly banking system data are available), total currency in circulation declined by about Rs 8,80,000 crore. This, in turn, was largely reflected in sharp increase of about Rs 6,72,000 crore in aggregate deposits of the banking system even after outflows in NRI deposits during the period.
