Rs 2,000 Note Withdrawal A Non-event, Favourable Impact On Deposits, Yields: SBI
Amid the criticism from the opposition, the State Bank of India (SBI) in a research report on Tuesday said that the withdrawal of Rs 2,000 note is likely to be a non-event.
The report, however, stated that there will be a favourable impact on liquidity, bank deposits and interest rates.
Decoding exchange/deposit dynamics, SBI mentioned that banks will already be holding some of these notes in their currency chests, thus the impact on deposits will be limited.
“We believe that almost the entire amount of Rs 3.6 trillion will come back (~ Rs 3 trillion excluding the amount in currency chests) to the banking system,” it said.
Assuming that ten to 15 per cent of the total Rs 2,000 notes are in currency chests, then of the remaining Rs 3 trillion if we assume MPC of 0.7, Rs 2 to 2.1 trillion would be spent by the consumers, approximately Rs one trillion is destined deposits in banks.
“Moreover, the balance of payment surplus in FY24 is expected to the tune of USD 1.5-2.0 billion thus providing further liquidity support,” according to the report.
The report stated that in digital payments, India has been witnessing new milestones which indicate the robustness of our payment ecosystem and acceptance by a wide stratum of consumers.
Looking at the ‘total digital payments’ percentage to nominal gross domestic product (GDP), it has increased to 767 per cent in the financial year (FY) 2023 from 668 per cent in FY16.
The retail digital payments (excluding RTGS) as a percentage of GDP has reached 242 per cent in FY23 from 129 per cent in FY16, the report mentioned.
Among all, UPI has emerged as the most popular and preferred payment mode in India pioneering person-to-person (P2P) as well as person-to-merchant (P2M) transactions in India accounting for 73 per cent of the total digital payments.
The volume of UPI transactions has increased multi-fold from 1.8 crore in FY17 to 8375 crore in FY23. The value of UPI transactions has also increased handsomely, from just Rs 6947 crore to Rs 139 lakh crore during the same period, a jump of 2004 times.
“Interestingly, CIC has moderated to reach 12.4 per cent of GDP in FY23, almost the same level as 2015-16. The yearly growth in CIC has also declined to 7.9 per cent in FY23 from 16.6 per cent in FY21,” it added.