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This is about 74% of the total currency which was in circulation - Rs 17.97 lakh crore - when the demonetisation scheme was announced in November last year.

Meanwhile, a report of State Bank of IndiaBSE -1.35 % said that the government's decision to ban high value Rs 500 and Rs 1000 notes may permanently erode about Rs 1.7 lakh crore worth of cash from circulation. This in turn may result in equivalent additional liquidity in the banking system.

After the December 30, 2016 deadline of depositing banned Rs 500 and Rs 1,000 notes with the banks, cash withdrawal has been declining rapidly from a peak of Rs 52,800 crore for the week ended January 13, to Rs 32,500 crore during the week ended March 24. Even in the span of one week between March 17 and March 24, cash withdrawals had declined by Rs 2,000 crore, the SBI report said.

The Reserve Bank of India injects currency notes of various denominations in the system according to the demand from time to time. Though over the years efforts have been towards lesser dependence on cash by moving to banking and other digital modes of transaction, cash demand is known to spike at times of elections and in years when monsoons and agricultural output has been good. This is because rural economy is predominantly cash-based.

The Reserve Bank of India injects currency notes of various denominations in the system according to the demand from time to time. Though over the years efforts have been towards lesser dependence on cash by moving to banking and other digital modes of transaction, cash demand is known to spike at times of elections and in years when monsoons and agricultural output has been good. This is because rural economy is predominantly cash-based.

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