Context: Despite the declining share of cash in individual transactions amid growing adoption of digital payments, currency in circulation (CIC) continues to grow at double-digit rates. Shirish Chandra Murmu, Deputy Governor, RBI, said this combination is making future cash demand harder to predict and is complicating the RBI’s planning for cash production and distribution capacity.
What is Currency in Circulation?
Currency in Circulation (CIC) is the total value of banknotes and coins in the economy — held by the public, in ATMs and in bank vaults outside the RBI. It is a component of reserve money (M0), the RBI’s own liability, and the base on which broader money supply measures are built.
Reserve Money (M0)
- Reserve Money (M0) is also called High-Powered Money or Monetary Base.
- It is the base of the money supply in the economy and is largely controlled by the RBI.
Components of M0
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M0 mainly includes:
- Currency in circulation (CIC) — currency notes and coins held by the public.
- Bankers’ deposits with RBI — reserves that commercial banks maintain with the RBI.
- Other deposits with RBI — deposits of institutions such as certain financial institutions and foreign central banks.
