₹2,000 note withdrawal boosts June deposits to 6-yr high of ₹191.6 lakh cr: Report

Withdrawal of ₹2,000 notes by the Reserve Bank on May 19 and the subsequent near total return of the currency to the system has buoyed deposit accretion to a six-year high of ₹191.6 lakh crore in June, according to a report.

Earlier this month, the RBI said more than three-fourths of the total 3.62 lakh crore of ₹2,000 bank notes have come back to the system by way of deposits (over 85%) and the rest as note exchanges.

According to Sanjay Agarwal, a senior director with Care Ratings, deposits witnessed a healthy on-year growth of 13% to ₹191.6 lakh crore, which is the highest in the past six years (since March 2017) in the fortnight ending June 30, partly supported by the withdrawal of the ₹2,000 currency notes and higher interest rates on deposits.

Deposits rose 13% in the reporting fortnight and sequentially, it expanded by 3.2% to ₹191.6 lakh crore and in absolute terms, deposits rose by ₹22 lakh crore in the trailing 12-month period when it had stood at Rs 185.7 lakh crore.

As a result, the spread between credit and deposits growth dropped to 326 basis points in the reporting fortnight as against 875 bps in November 2022, which was the largest. This can be attributed to a rise in deposits in the last two to three fortnights.

This has had the short-term weighted average call rate (WACR) rising to 5.94% as of June 30 from 4.3% as of July 31, 2022, primarily due to the elevated policy rates. The WACR had peaked at 6.69% as of May 4, 2023.