Circulation of currency grew by 13%
Digital transactions are yet to break India바카라s love affair with cash. Here바카라s why.
Circulation of currency grew by 13%
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Love for cash seems to know no bounds in India. Two events within a short span of time바카라demonetisation announced in November 2016, which led to long queues outside ATMs, and then the Covid-induced lockdown in March-June 2020바카라have reaffirmed that 바카라cash is king바카라. The latest report of the country바카라s central bank, the Reserve Bank of India, states that currency in circulation grew by around 13 per cent in the first three quarters of the current fiscal. From Rs 24,47,312 crore on March 31, 2020, it went up to Rs 27,70,315 crore on January 1, 2021. The trend was already hinted at in the RBI바카라s Annual Report 2019-20, which said that demand for currency started to increase in the wake of heightened uncertainty due to the pandemic. 바카라The main driving factor is the precautionary motive in uncertain times. Also, Indian preference for cash is legendary and it gets reinforced in these circumstances,바카라 says CARE Ratings chief economist Madan Sabnavis. 바카라Real India has been and will continue to use cash, while digital transactions will move in parallel. Several low volume transactions will be done through e-wallets, although the number of transactions will be high.바카라
Cash withdrawals from ATMs have been growing over the past five years, with India next only to China. This is despite India바카라s ATM penetration relative to population being one of the lowest among emerging markets and the fact that less than a fifth of the ATMs are in rural areas. Market experts believe India바카라s spending behaviour has been very predictable, especially in the past few years. E-wallets are being used for paying bills and small purchases like grocery, while credit cards, debit cards and EMIs are used for larger expenses. Retail business, especially in the MSME segment, still works on cash. 바카라India바카라s small and medium businesses still prefer cash,바카라 a senior official from the State Bank of India, who didn바카라t wish to be identified, tells Outlook. 바카라Salaries to employees and payments from clients바카라most of it is done in cash due to the credit system followed in the Indian market, where payments are made in tranches.바카라 Digital payment has been ushered in, but there are several expenses of which people don바카라t want to keep a record or pay taxes on. One of the classic examples is gold, which traded at an all-time high during the pandemic in 2020. 바카라Indian consumers were going bullish on it and a lot of purchases were off the books, where people bought it from goldsmiths and traders without billing and evading GST,바카라 says the bank official, adding that he knows several clients who withdrew money to do such transactions.
바카라For a bottle of 20 litres that costs around Rs 70-90 to a consumer and which is mostly delivered at home, no billing is done. It doesn바카라t make business sense to issue receipts for such small volume,바카라 says Anurag Dwivedi, a water-bottle refiller and trader in Delhi-NCR region. Anurag is part of India바카라s retail business, which is still largely unorganised and prefers cash. India바카라s currency in circulation includes banknotes and coins. At present, the RBI issues notes in denominations of Rs 2,000, Rs 500, Rs 200, Rs 100, Rs 50, Rs 20, Rs 10, Rs 5 and Rs 2, and coins in denominations of Rs 20, Rs 10, Rs 5, Rs 2, Re 1 and 50 paise.
Banking and market experts believe mass layoffs of workers also brought more cash into circulation due to payments made to them. 바카라There is a classic age divide in consumer trends in India바카라while the youth prefer digital transactions, the elderly believe in age-old systems of cheque and cash, and the middle-aged Indian is still evolving,바카라 says a senior government official requesting anonymity. 바카라But the fact is that the Indian mindset is still hooked on to cash hoarding due to several reasons. An average Indian housewife doesn바카라t want to disclose the savings she makes from money set aside for household expenditures. When it comes to household labour like maids, drivers and cooks, everyone prefers cash. Rural India still doesn바카라t have proper access to the banking system. Our social fabric is such that people won바카라t budge despite the government pushing digital transactions in form of RuPay card or UPI. It is a failure of the banking system that it hasn바카라t been able to reach out to the masses despite several opportunities provided by successive governments.바카라
A peek into the demonetisation phase gives a glimpse of India바카라s cash reserves. On November 8, 2016, when PM Narendra Modi announced demonetisation of Rs 500 and Rs 1,000 notes, the decision stripped currency worth Rs 15.41 trillion (86.9 per cent of the total) of legal status. In 2018, the RBI reported that Rs 10,720 crore did not return to the banking system.
After demonetisation, the central government made several efforts to support digitisation by promoting mobile wallets, enabling non-banking players like Google, Paytm and PhonePe for UPI transactions, introducing schemes like Jan Dhan Yojana and Aadhaar-based payments of scholarships and subsidies. India remains largely a cash economy, and is still emerging as a market where new digital-transaction technologies targeting youth are launched. According to the RBI, digital transactions have been growing and total non-cash retail payments increased to 97 per cent during 2019-20, up from 95.4 per cent in the previous year.
In the years to come, the e-wallet segment and non-banking players would be in competition with technologies like tap-and-go, which doesn바카라t need internet and pre-paid cards. They are expected to gain traction in the years ahead for overcoming internet connectivity issues and encouraging more contactless payments. The prepaid card segment can be used to keep a check on overspending and also ensure an account of what is being spent on. They can be used at POS terminals and prevent exposure of bank accounts to public networks, bringing in additional security. Market experts say a India has huge appetite to accommodate new payment technologies, but cash will remain king.