Cash ban leads to less cash withdrawal, trouble ahead?

New Delhi: Cash withdrawal has been falling rapidly, post demonetisation, as borne out by the fact that it is down to Rs 32,500 crore in the week to March 24 from a peak of Rs 52,800 crore for the week ended January 13, says a report.

According to SBI research report Ecowrap, even in the span of one week (between March 17 to 24), cash withdrawal has declined by Rs 2,000 crore.

The report said the decline in cash withdrawals is “intriguing” even as limits on withdrawals were removed completely from March 13. The public opinion is one of common sense. The banks are now charging unreasonable amounts of fees for cash transactions over Rs 10,000. People have become wary about the new rules, and it will be a matter of time before the protests to set in.

Moreover, with implementation of ban on cash transactions of over Rs 2 lakh from April 1, further decline in cash withdrawal may be a possibility.

The report did not cite any solid reason for the decline, but said strict monitoring on cash withdrawal and shift to digital payment could be an explanation.

“While it may be difficult to ascribe a reason, our estimates indicate that there would be a permanent liquidity injection of least Rs 1.7 lakh crore or 1.1 per cent of GDP post demonetisation,” the report said, adding that this data are a reflection of the extent of formalisation of the economy.

This declining trend in cash withdrawal will also have repercussions on RBI liquidity management policy, the report added.