<p>The withdrawal of Rs 2,000 notes by the Reserve Bank of India could indirectly lead to a boost in bank deposits, loan repayments, consumption and even India’s gross domestic product, State Bank of India’s Chief Economic Advisor Soumya Kanti Ghosh said on Monday.</p>.<p>“The ‘precision strike’ by RBI hits the right notes on multiple counts, taking pressure off substantially from a near war-like quest for deposits from the banking system while also smoothening the bias for higher interest rates going forward,” said Ghosh in a research report.</p>.<p>“Additionally, the move effectively anchors the surge in incremental credit-deposit ratio, nearing pre-pandemic levels, by filling the coffers and keeping banks ready to meet funding needs from diverse sectors,” he said.</p>.<p><strong>Read | <a href="https://www.deccanherald.com/business/business-news/affordable-housing-segment-will-make-up-40-of-our-book-in-3-5-years-pnb-housing-finance-ceo-1229274.html" target="_blank">Affordable housing segment will make up 40% of our book in 3-5 years: PNB Housing Finance CEO</a></strong></p>.<p>Ghosh even said that SBI now expects GDP growth for the first quarter of FY24 (April-June 2023) at around 8.1% with an upward bias due to the impact of Rs 2,000 note withdrawal event, and full year GDP growth could be higher than the 6.5% projected by the finance ministry and the RBI.</p>.<p>Ghosh said that short-term rates should ease due to the amount of Rs 2,000 notes being deposited, in alignment with smoothening of benchmark yields.</p>.<p>“With overseas markets remaining choppy Indian banks should get more elbow room to meet the demands from corporates to fund their expansion plans through a mix of credit facilities,” he said.</p>.<p>He also said that the RBI’s retail central bank digital currency project should be an ultimate beneficiary of this tactical move as it transitions from a beta-testing phase, to hit the streets. The absence of higher denomination note should propel faster adoption of e-RUPI for merchant transactions, concurrent with physical fiat currency, he said.</p>.<p>While deciding on the demonetisation exercise in 2016, the government and the RBI decided to bring in the Rs 2,000 note to remonetise the economy faster. </p>.<p>The decision to withdraw the note from May 19 onwards was taken since the Rs 2,000 denomination note had served its purpose. Post 2017-18, the printing of new Rs 2,000 notes had not been carried out. The lifespan of a large denomination note is 4-5 years, and RBI did a survey in 2021 which showed that the note is not popular in usage. Hence the decision was taken to withdraw it.</p>.<p>In value term, the share of 2,000 denomination notes (Rs 3.62 lakh crore) was at 10.8% as on March 2023. As per the latest statement by Reserve Bank of India Governor Shaktikanta Das earlier this month, around 1.8 lakh crore of Rs 2,000-rupee notes have come back to the system. Of this, around 85% have come as deposits and the rest are exchanged for other smaller denominations, Ghosh clarified.</p>
<p>The withdrawal of Rs 2,000 notes by the Reserve Bank of India could indirectly lead to a boost in bank deposits, loan repayments, consumption and even India’s gross domestic product, State Bank of India’s Chief Economic Advisor Soumya Kanti Ghosh said on Monday.</p>.<p>“The ‘precision strike’ by RBI hits the right notes on multiple counts, taking pressure off substantially from a near war-like quest for deposits from the banking system while also smoothening the bias for higher interest rates going forward,” said Ghosh in a research report.</p>.<p>“Additionally, the move effectively anchors the surge in incremental credit-deposit ratio, nearing pre-pandemic levels, by filling the coffers and keeping banks ready to meet funding needs from diverse sectors,” he said.</p>.<p><strong>Read | <a href="https://www.deccanherald.com/business/business-news/affordable-housing-segment-will-make-up-40-of-our-book-in-3-5-years-pnb-housing-finance-ceo-1229274.html" target="_blank">Affordable housing segment will make up 40% of our book in 3-5 years: PNB Housing Finance CEO</a></strong></p>.<p>Ghosh even said that SBI now expects GDP growth for the first quarter of FY24 (April-June 2023) at around 8.1% with an upward bias due to the impact of Rs 2,000 note withdrawal event, and full year GDP growth could be higher than the 6.5% projected by the finance ministry and the RBI.</p>.<p>Ghosh said that short-term rates should ease due to the amount of Rs 2,000 notes being deposited, in alignment with smoothening of benchmark yields.</p>.<p>“With overseas markets remaining choppy Indian banks should get more elbow room to meet the demands from corporates to fund their expansion plans through a mix of credit facilities,” he said.</p>.<p>He also said that the RBI’s retail central bank digital currency project should be an ultimate beneficiary of this tactical move as it transitions from a beta-testing phase, to hit the streets. The absence of higher denomination note should propel faster adoption of e-RUPI for merchant transactions, concurrent with physical fiat currency, he said.</p>.<p>While deciding on the demonetisation exercise in 2016, the government and the RBI decided to bring in the Rs 2,000 note to remonetise the economy faster. </p>.<p>The decision to withdraw the note from May 19 onwards was taken since the Rs 2,000 denomination note had served its purpose. Post 2017-18, the printing of new Rs 2,000 notes had not been carried out. The lifespan of a large denomination note is 4-5 years, and RBI did a survey in 2021 which showed that the note is not popular in usage. Hence the decision was taken to withdraw it.</p>.<p>In value term, the share of 2,000 denomination notes (Rs 3.62 lakh crore) was at 10.8% as on March 2023. As per the latest statement by Reserve Bank of India Governor Shaktikanta Das earlier this month, around 1.8 lakh crore of Rs 2,000-rupee notes have come back to the system. Of this, around 85% have come as deposits and the rest are exchanged for other smaller denominations, Ghosh clarified.</p>