LNP – SL sees unprecedented 14.5% surge in cash in 2024

• Reaches new post-pandemic high of Rs.1.36tn
• Marks a significant rise from Rs.1.19tn in 2023
• Majority of currency, amounting to Rs.1.05tn (equivalent to 77.4%), was held by public, while banks retained Rs.307.7bn
• Despite rise of digital payment platforms, physical cash remains deeply entrenched in Sri Lanka’s economyÂ

 By Nishel Fernando

The Central Bank has reported an unprecedented 14.5 percent year-on-year (YoY) growth in physical cash circulation during 2024.Â

Total currency in circulation reached a new post-pandemic high of Rs.1.36 trillion by the end of the fourth quarter.

This marks a significant rise from Rs.1.19 trillion in 2023, underscoring the sustained public reliance on cash, despite the increasing adoption of digital payment systems.

Typically, cash circulation peaks in the second quarter, due to the increased activities related to the Sinhala and Tamil New Year festival. However, this trend did not hold true last year. The currency in circulation stood at Rs.1.23 trillion at the end of the second quarter and continued to grow in the third and fourth quarters.

According to the Central Bank, the majority of the currency, amounting to Rs.1.05 trillion (equivalent to 77.4 percent), was held by the public, while the banks retained Rs.307.7 billion. This is in contrast to the 71-76 percent range observed during the past two years.

As the vast majority of cash in circulation remains outside the banking system, experts point out that this hinders the potential lending capacity of the banks, thereby impacting the economic growth.

Despite the rise of digital payment platforms, physical cash remains deeply entrenched in Sri Lanka’s economy. Analysts attribute this to cultural preferences for cash, limited digital infrastructure in rural areas, security concerns and the informal sector’s reliance on tangible currency.

The report highlighted that the smaller denominations like the Rs.20, Rs.50 and Rs.100 notes remained heavily circulated, likely due to their frequent use in retail transactions. However, in terms of value, the Rs.5000 note dominated, accounting for 78.5 percent of the total value.