Cash with the Public

Cash with the public, formally called currency with the public, is the stock of physical notes and coins held outside banks at a given point in time. It is a component of India’s money supply, representing immediately spendable currency in public hands rather than money held as bank deposits.

How it is measured

The RBI derives currency with the public by subtracting cash held by banks from currency in circulation. Currency in circulation covers notes and coins circulating in the economy, while vault cash remains within the banking system.

• It is a stock variable, measured on a particular date, not the value of cash transactions during a period.
• A rise can reflect withdrawals from deposits, seasonal demand, precautionary holdings or growth in nominal economic activity.

Place in monetary aggregates

Currency with the public is the cash component of both narrow and broad money, but it must be distinguished from the wider concept of currency in circulation.

• M1 equals currency with the public, demand deposits with the banking system and other deposits with the RBI.
• M3 equals M1 plus time deposits with the banking system and is commonly called broad money.
• Reserve money uses currency in circulation, not currency with the public, because it also accounts for currency held by banks.

What the figure does and does not indicate

The figure indicates the public’s preference for holding part of its money in physical form instead of deposits. It does not by itself measure the volume of cash payments, since the same currency can finance repeated transactions, nor does it directly measure unaccounted income.