Deposit of ₹2,000 notes could result in a boost in bank deposits, repayment of loans, consumption: SBI Ecowrap

deposit banknotes 2000 rupees, Which RBI decided to withdraw from trading As part of its management of currencies, in banks could lead to an increase in bank deposits, loan repayments, depreciation, CBDC (Central Bank Digital Currency), and a potential increase in GDP, according to the State Bank of India Economic Research Report. “Ecurap”.

Soumya Kanti Ghosh said: “The RBI’s ‘accurate strike’ has hit the right banknotes on several counts, greatly relieving pressure from the warlike pursuit of deposits from the banking system while also easing the bias for higher interest rates in the future.” “. Group Chief Economic Adviser, SBI.

In addition, the move effectively anchors the increase in the C/D ratio (credit deposits), which is close to pre-pandemic levels, by filling coffers and keeping banks ready to meet financing needs from various sectors.

Rating details

SBI’s Economic Research Division team has assessed that short-term rates (commercial papers/CPs) should ease from the top end, in line with the cooling down of benchmark returns while CDs (certificate of deposit) collected by banks to finance credit applications/investment finds should be Also a rationale.

“With overseas markets still volatile (further consolidation of mid- and small-sized banks in advanced economies seems certain going forward with Fed rate hikes distorting the weak balance of past years), Indian banks must be given more space to cater to corporate demands to fund their plans. expansion through a combination of credit facilities.

Deposits in the banking system through companies are witnessing a smart attraction, mainly through group deposits, as better returns combined with liquidity and security have made bank deposits a preferred alternative for companies of various categories including PSUs and NBFCs, according to Ecowrap.

Pay e-RUPI

The report said that the CBDC (e-RUPI) project of the Reserve Bank of India (RBI) should be the ultimate beneficiary of this tactical move as it moves from the beta testing phase at CUG (Close User Group) to the streets (through the willingness of the banks involved. To the merchants selectors and retail people on board in the real-time payment landscape with their dedicated apps).

The lack of higher-rated banknotes should drive faster adoption of e-RUPI for commercial transactions, in conjunction with physical fiat currency.

The Economic Research Division (ERD) of the SBI projects first-quarter (April-June) FY14 GDP growth of about 8.1 percent with an upward bias due to the impact of the $2,000 recall event. “This reinforces our expectation that GDP for FY24 may be higher than 6.5 per cent, based on the RBI estimate,” Ghosh said.

Circulating notes

In terms of value, the share of the Rs 2,000 banknote (at INR 3.62 crore) was at 10.8 per cent as of March 2023. On the current trend when returning Rs 2,000 banknotes, 85 per cent of these (INR 3.08 crore) notes ). -lakh crores) to the banking system as deposits and the remainder (Rs. 54,000 crores) will be redeemed across the counter.

As per ERD valuation, Rs. 92,000 crore will be credited to the current account and loan accounts and Rs. 1.23 crore will be credited to the current account.

The ERD team said about 60 per cent of the Rs 2,000 notes deposited into the savings account will be withdrawn, resulting in an immediate depreciation of around Rs 55,000 crore.

Long-run consumption enhancement is estimated at ₹1.83 crore through the marginal propensity to consume multiplier.