KUALA LUMPUR – Despite movement restrictions and the rapid acceleration in e-commerce and online spending last year, cash remained the most prevalent medium of payment, registering an annual growth of 14.3% – the highest increase in currency in circulation (CIC) in the last 10 years.
“At the end of 2020, there was approximately RM130.4 billion worth of banknotes and coins in circulation, with an annual growth rate of 14.3%. It is the highest increase in CIC in the last 10 years,” said Bank Negara Malaysia (BNM) in its Annual Report 2020 released today.
In 2019, the CIC was 7.3%, while it averaged at 8.9% in the last decade.
“The significant increase in demand, which can also be observed in other countries, is due to members of the public and small businesses engaging in precautionary behaviour, as they sought to hold more cash during the Covid-19 pandemic.”
With a higher CIC and decline in gross domestic product, the CIC over GDP rose to 8.3% from 6.6% the previous year.
With the public keeping more cash in hand, the central bank received 23% fewer deposits from financial institutions in 2020, translating into fewer fit banknotes available for issuance into circulation.
To meet the surging demand for cash, it executed three action plans using its buffer that comprises additional currency stock kept over and above normal consumption.
The buffer stock is to ensure there is sufficient cash to meet surging demand in unforeseen circumstances.
During the pandemic, having an adequate buffer proved indispensable to the bank in ensuring no shortage of cash throughout last year.
BNM also collaborated closely with strategic partners in the cash industry, especially financial institutions and cash-in-transit companies (CITs), to ensure cash was continuously available at more than 12,000 ATMs nationwide.
“In this regard, as financial institutions and CITs are classified as essential services, their operations remained uninterrupted during the movement control order,” said the report.
The bank also ensured business continuity and minimal disruptions to the operations of automated cash centres, which have the capacity and capability to process significant volumes of banknotes for issuance into circulation, by implementing split operations and back-up teams.
Maintaining the currency’s high quality, BNM said it processed 2.3 billion banknotes in 2020 (2.9 billion the previous year), and shredded 23.3% (20% the previous year) that no longer met quality standards.
On counterfeit banknotes, it said ongoing efforts contribute to Malaysia’s consistently low counterfeiting rates.
At the end of 2020, the country’s counterfeiting rate stood at less than one piece per million (ppm) of banknotes (one ppm the previous year), well below other benchmarked countries. – Bernama, March 31, 2021
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