One year after demonetisation: Where did all that cash go?

Where did banks send every one of the assets they got in the previous one year? Maybe this wholes it up best: toward the finish of October 2016, just before demonetisation, the year-on-year increment in bank credit was Rs5.9 trillion and the ascent in bank interests in government securities was Rs2.1 trillion. After a year, toward the finish of October 2017, the year-on-year increment in bank credit had tumbled to Rs5.3 trillion, while bank interest in government securities took off to Rs4.6 trillion. In actuality, banks dumped the overabundance stores into government securities, cutting down loan fees on them and helping the administration get at less expensive rates.

Obviously, it's difficult to unwind the amount of this pattern is because of demonetisation, the amount to the merchandise and ventures assess (GST), the amount to banks' repugnance for loaning as an outcome of prospering awful credits and how much because of different variables influencing the economy. Everything we can state is that because of every one of these variables, the vast majority of the gradual addition to stores went into interests in government securities, while a mix of interest limitations and unnecessary use checked business obtaining.

The prompt impact of demonetisation was a race to store the demonetized notes in banks. Did that outcome in a tremendous development in bank stores? It did, however just for some time. Before a month ago's over, the year-on-year development rate of bank stores was 9.24%, about the same as the development rate of 9.25% toward the finish of October 2016. The development in stores has ended up being a simply transitory marvel.

As is outstanding, trade out course has diminished and with store development continuing as before, the cash supply (M3) development too has descended. At end-October 2017, year-on-year M3 development was 6.5%, contrasted with 10.4% at end-October 2016.

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