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RBI study claims major drop in cash payments after demonetisation

There was a sharp growth in card transactions at points of sale terminals for both demonetisation and post- demonetisation periods, it added

Press Trust of India  |  Mumbai 

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The note-ban has resulted in a "fundamental shift" in the payment habits in the economy-a move away from cash payments to and a wider adoption of retail electronic payments, card usage at merchant terminals and cheques, an study has found. The government had on November 8 last year surprisingly cancelled all the banknotes in the Rs 1,000 and 500 denominations, which was around 86 per cent of the money in circulation, with multiple objectives. "The has impacted the inter-bank payments and settlement system significantly in moving cash transactions to non-cash modes of payments in three segments- retail electronic payments, card usage at PoS terminals and cheques," the Reserve Bank has said in its weekly supplement, Mint Street Memos. "The increased usage of these instruments during the note-ban period has been sustained in the as well, suggestive of a fundamental shift being underway in the payment habits," said the study conducted under the guidance of Sasanka Sekhar Maiti of RBI's Department of Statistics and Information Management. As per the study, volumes and values contracted during the pre-period but recorded positive growth during as well as post-note-ban months. "The increase in usage of cheques could be an effect of as cash availability was restricted and became a convenient instrument to transfer funds, which takes one or two days given the substantial reduction in settlement cycle on account of implementation of truncation system," it explained. There was a sharp growth in card transactions at points of sale terminals for both and post- periods, it added. It said courtesy RBI's mandates since 2008 on usage of electronic modes for high value payments in the inter-bank market, there had been a reduction in the usage of cheques prior to the note-ban.

First Published: Fri, November 24 2017. 22:36 IST