KUALA LUMPUR: Cash remains the most prevalent medium of payment, despite movement restrictions and rapid acceleration in e-commerce and online spending in 2020, Bank Negara Malaysia said.
As at end-2020, there was RM130.4 billion worth of banknotes and coins in circulation (CIC), up 14.3 per cent over 2019, Bank Negara said in its Annual Report 2020 released today.
This was the highest increase in currency in circulation in the last 10 years (2019: 7.3 per cent, last 10-year average of 8.9 per cent), the central bank added.
"This significant increase in demand for cash, which can also be observed in other countries, was 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 higher CIC and a decline in gross domestic product (GDP), our CIC over GDP rose to 8.3 from 6.6 per cent in the previous year," Bank Negara said.
The central bank said to encourage recirculation, it was actively partnering with coin agents and financial institutions to collect coins from the public which are then reissued into circulation.
Last year, Bank Negara collected and recirculated 82.1 million coins or 9.1 per cent of Kilang Wang's (KWG) annual output.
"This represent a considerable saving. Nevertheless, the challenge remains to get the public to recirculate more coins kept at home, when making payment for retail transactions," it said.
In managing currency operations, the central bank said unlike banknotes, it was not able to recirculate used coins on the same scale as the public were less likely to deposit their excess coins with financial institutions.
It is estimated that as much as 30 per cent of coins issues every year ends up being kept idle at home, in jars and drawers, as "dead coins".
Meanwhile, Bank Negara said a key focus to maintain the high quality of banknotes was to ensure public confidence in the local currency.
"This involves the bank removing worn and defective banknotes that do not meet quality standards and replacing them with either new or fit banknotes," it added.