"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.
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 Reserve
Bank of India (RBI). Having a high currency in circulation (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.
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