The Reserve Bank of India’s (RBI) recent decision to withdraw Rs 2000 notes from circulation has resulted in a notable surge in bank deposits.
According to a recent report, the cash held by banks has reached a six-year high, totaling Rs 191.6 lakh crore.
Cash in Banks Reaches Six-Year High at Rs 191.6 Lakh Crore
Recent data reveals that the withdrawal of Rs 2000 notes has led to a significant increase in bank deposits, with the total cash in banks reaching a record high of Rs 191.6 lakh crore.
This marks the highest deposit figure in the past six years.
13% Increase in Deposits Triggered by Note Withdrawal and High Interest Rates
The primary factors contributing to the surge in bank deposits are the withdrawal of Rs 2000 notes from circulation and the attractive interest rates offered by banks.
Deposits have witnessed a 13% increase in the reviewed fortnight, reaching Rs 191.6 lakh crore, reflecting a 3.2% rise.
Over the last 12 months, bank deposits have grown by 22 lakh crores to reach Rs 185.7 lakh crore.
The RBI had announced the withdrawal of the Rs 2000 note on May 19.
Reduction in Loan-Deposit Gap Paves the Way for Potential Interest Rate Decrease
Since the announcement of the withdrawal of Rs 2000 notes, bank deposits have experienced a rapid rise.
Consequently, the gap between loans and deposits has significantly decreased.
In November 2022, this gap stood at 8.75%, but it has now decreased to 3.26% in June 2023.
This reduction benefits bank customers, as the narrowing gap between loans and deposits may lead to potential interest rate decreases.
Experts anticipate that the increased cash flow in banks will be passed on to customers in the form of lower interest rates in the future.
