SBI sees India getting close to normal by end Feb 2017, if the RBI continues printing new currency at the current pace

Post demonetisation, banks have been working really hard to get back the old money and distribute the new denominations. The country faced a severe cash crunch after the demonetisation was announced and things are settling down slowly. According to a report by State Bank of India, the Reserve Bank of India replaced as much as 44% of the currency extinguished by demonetisation with new notes by December 30.

The report also confirmed that India's currency supply is likely to return to near normal by February end and growth, which has been hit by the withdrawal of 500 and 1,000 notes, is likely to bounce back faster than earlier expected.

The level of replenishment is perhaps not rising faster because the central bank, having initially focused on pumping new 2,000 notes into the system, is now concentrating on currency of lower denominations, SBI group chief economist Soumya Kanti Ghosh told ET .

The SBI also forecasted that by the end of this month, 67% of the cancelled currency will get replaced if the central bank prints notes of various denominations at the current pace, and to 80-89% by the end of next month.

"Either way, contrary to market perception, things will be closer to normal by February-end as opposed to predictions of the crisis lasting longer. If this is the case, the possibility of a GDP bounce-back faster than anticipated may not be ruled out,” Ghosh told ET.