April 2, 2016

Mystery surge in cash with public hurts banks

A steep surge in the amount of currency in circulation has baffled bankers and economists as this preference for cash among the public is slowing down deposit growth and hurting banks. According to data released by the Reserve Bank of India, cash with the public grew by 48% in the last fiscal till March 18, adding over Rs 2 lakh crore to the currency in circulation.

The unusual rise in cash with the public has prompted State Bank of India chairman Arundhati Bhattacharya to call upon the central bank to examine the reasons for the increase. Bhattacharya raised the issue amid banks facing issues of systemic liquidity due to high currency holdings( both in the form of cash and jewellery) as well as the rise in government cash balances with the RBI.

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