Financial regulators seem to have acknowledged that in India, cash is king. A little over seven months after demonetisation, as on June 16, the currency in circulation stood at Rs 15.29 lakh crore, or 86.2 per cent of the pre-demonetisation level of Rs 17.74 lakh crore.
“In the wake of demonetisation, digital transactions have got a substantial push. While the period of observation is not sufficiently long to derive definitive conclusions, normalisation of notes in circulation appears to be dampening the growth of digital transactions,” said the latest financial stability report, which is published by the Reserve Bank of India on behalf of all financial regulators.
The government has given a major push towards unified payment interface (UPI)-based BHIM app, which enables people to transfer payments in an instant via their mobile phones. But the adoption rate of this app is not yet as broad-based as was expected. However, to deter customers from using cash, some banks have put heavy cash handling charges in branches above certain limits. Also, restrictions on withdrawal from automated teller machines (ATMs) are also back as they were before demonetisation exercise.
Traditional cards and prepaid instruments still significantly dominate the retail payment platforms, both in value and volume, the report said. Interestingly, in March, digital transactions peaked sharply, but then dropped almost equally in April and has remained almost same in May and June.