Currency in circulation (CiC) rose 22.7 per cent as of January this year as people continued to hold on to cash amid the Covid-19 pandemic.

The 22.7 per cent increase is one of the sharpest after the peaks that were seen post-demonetisation. It is double the growth that was seen in January 2020 — and also exceeds the 19.5 per cent increase that was witnessed in January 2019.

The RBI data also showed M3, or the broad money supply growth, was 12.5 per cent or Rs 20.34 lakh crore.

Data released by the Reserve Bank of India has shown that on a year-on-year basis, CiC grew Rs 4,95,473 crore from January last year.

In the previous year, this growth was 11.8 per cent or

Rs 2,40,091 crore. It now stands at Rs 26,74,707 crore, up from Rs 23,49,748 crore as of March 31, 2020. So far in this financial year, currency in circulation has gone up by Rs 3,24,958 crore or 13.8 per cent.

The trend is not surprising and this has largely been the norm since the beginning of this financial year as the Covid-19 pandemic led to households keeping cash as a precautionary measure.

However, this is expected to moderate as economic activity picks up momentum with the rollout of the vaccine.

According to the RBI’s annual report for 2019-20, many countries, especially in the emerging world, have seen cash in circulation rising during the pandemic.

The cross-country monetary statistics (IMF, 2020) indicated that the increase in currency in circulation was particularly sharp in Brazil, Chile, India, Russia and Turkey, and also in advanced economies such as the US, Spain, Italy, Germany and France, where the use of cash is less.

The RBI further pointed out that the rise in currency in circulation in these countries occurred simultaneously with liquidity injecting measures undertaken by their central banks.