You are here: Home » Economy & Policy » News
Business Standard

Cash is still king in India, but digital payments rising sharply: RBI

"India is next only to China in terms of the cash. However, the percentage of cash withdrawals to GDP has been constant in India at around 17 per cent," the report said.

Topics
Reserve Bank of India | Digital Payments | Currency in Circulation

Anup Roy  |  Mumbai 

cash
“India continues to have a strong bias for cash payments," the study noted.

Cash is still king in India, but there has been a perceptible shift in favour of digitisation in recent years, according to an internal study of the (RBI). Having a high (CIC) relative to gross domestic product (GDP) is a good indicator of cash being highly preferred for payments. Based on this assumption, “India continues to have a strong bias for cash payments," the study noted.

Demonetisation and an active growth in GDP brought down the cash in circulation as a percentage of GDP to 8.70 per cent in 2016-17. This increased to 10.70 per cent in 2017-18 and to 11.2 per cent in 2018-19 which, however, is less than the pre-demonetisation level of 12.1 per cent in 2015-16.

“The rate of increase is lower, indicating a perceptible shift away from cash,” the report said.

The notes in circulation (CIC minus coins in circulation) increased at an average rate of 14 per cent between October 2014 and October 2016.

Assuming the same growth rate, notes in circulation (NIC) would have been Rs 26 trillion in October 2019. NIC, however, was Rs 22.3 trillion, indicating that digitaisation and reduction in cash usage helped reduce NIC by over Rs 3.5 trillion, according to the report. However, the cash withdrawals from ATMs increased over the past five years.

“India is next only to China in terms of the cash. However, the percentage of cash withdrawals to GDP has been constant in India at around 17 per cent,” the report said, adding, with a compound annual growth rate (CAGR) of 9 per cent in terms of

volume and 10 per cent in terms of value, the growth in cash withdrawals has been slow when compared to digital payment transactions, which grew at a CAGR of 61 per cent and 19 per cent in terms of volume and value, respectively. This indicated a shift towards digitisation.

Thus, “in India, like in many parts of the world, cash is the well-established and widely used payment instrument. It is, however, reassuring that non-cash payments, especially those using electronic or digital modes, are rapidly increasing.”

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Tue, February 25 2020. 02:40 IST
RECOMMENDED FOR YOU
.