The Reserve Bank of India (RBI) has released its weekly statistical supplement on Friday, 6 January 2017 in which currency in circulation (CIC) as on 30 December 2016 (the last day for surrendering old Rs 500 and Rs 1,000 notes in banks) has been disclosed as Rs 9.384 trillion. This is a drop of Rs 8.591 trillion from the corresponding amount of CIC of Rs 17.976 trillion as on 4 November 2016 (two working days prior to demonetisation announcement).

The drop in CIC comprises of two components: the old Rs 500 and Rs 1,000 currency notes (specified bank notes or SBNs) deposited by public into the banks and post offices, and the amount of fresh currency injected into circulation by RBI, the former reducing the CIC and the latter, increasing it. Obviously, since the SBNs deposited is in excess of fresh currency injected (why else will we all continue to face shortage at ATMs and weekly withdrawal limits still?), the total CIC has dropped sharply, by almost 50 per cent.

With the above information, if one were to estimate the amount of fresh currency injected into circulation by RBI, the amount of SBNs deposited can be easily arrived at.

The fresh currency injected into the system has only two components:

A) Lower denomination currency already available with RBI, which has since been released into circulation, and

B) New Rs 500 and Rs 2000 notes printed and circulated between 8 November and 30 December 2016.

Let us analyse both these components based on publicly available data.

A. Estimating Fresh Lower Denomination Currency

A press release issued by RBI as on 19 December 2016 comes in handy to estimate both the above numbers. According to this release, RBI has injected 20.2 billion pieces of lower denomination currency (10s, 20s, 50s and 100s) afresh into the system. While RBI has not specifically mentioned the amount in value, the same can be estimated based on the mix of lower denomination currency available with RBI, disclosed in its latest annual report as of March, 2016. The composition (56 per cent in 10s, 9 per cent in 20s, 7 per cent in 50s and 28 per cent in 100s), when applied on the 20.2 billion pieces freshly injected, implies a value of Rs 0.79 trillion.

The above is also corroborated from another source of evidence. An RTI response by RBI revealed that, as on 8 November 2016, the total inventory (as different from amount in circulation) of lower denomination currency was Rs 3.42 trillion (0.41 in 10s, 0.19 in 20s, 0.33 in 50s and 2.50 in 100s). The amount of lower denomination currency that was already in circulation as on 8 November 2016 was Rs 2.53 trillion (i.e. difference between Rs 15.44 trillion of demonetised currency out of Rs 17.97 trillion total CIC). So the maximum amount of fresh lower denomination currency that RBI could have injected into circulation could be Rs 0.89 trillion (3.42 minus 2.53). Given that a good amount of such currency will be awaiting screening for soiled notes, etc, the initial estimate of Rs 0.79 trillion in fresh lower denomination currency would be a fairly accurate estimation.