However, digital payments have seen a faster growth rate of 61% CAGR by volume and 19% by value.

Cash withdrawals from ATMs increase over past 5 years RBI reportImage source: Picxy.com/dimpy16
Money Cash Tuesday, February 25, 2020 - 14:45

In what comes as proof that cash is king in India, the Reserve Bank of India (RBI) has released a report that there has been a steady increase in cash withdrawals from ATMs in the country. At the time of the demonetization in November 2016, Prime Minister Modi had said there must be a dedicated movement towards digital payments rather than cash payments.

To be specific, a study of the last five years shows that there has been a steady level of 17% of GDP being the cash withdrawals from ATMs. This is just second to China.

However, the report also notes that the notes in circulation (which is cash in circulation minus coins) increased at an average rate of 14% between October 2014 and October 2016.

“Assuming the same growth rate, notes in circulation (NIC) would have been Rs 26,04,953 crore in October 2019. NIC, however, was Rs 22,31,090 crore, indicating that digitisation and reduction in cash usage helped reduce NIC by over Rs 3.5 lakh crore,” the report states.

However, one significant statistic is that digital payment transactions (payments through credit/debit cards and using online payments for transactions), are growing at a compound annual growth rate (CAGR) of 61% by volumes and 19% by value. Compared to this, the cash withdrawals at ATMs are only growing at 9% in terms of volume and 10% in terms of value. Interestingly, the number of ATMs itself has grown only by 4%.

Another interesting observation in the study done by RBI is that people prefer high denomination notes than lower denomination suggesting they are keeping the currency than spending it.

An independent report by Credit Suisse had also commented that 72% of transactions are being carried out by cash in India. In China it is just half of this. That study had found that smaller traders and those in the rural/ interior areas of the country have issues dealing in digital transactions. The two key reasons being cited are lack of internet connectivity and the reluctance on the part of the merchants to pay the commission to the card operators/banks. Often many retailers tell their customers they can accept card payments but at a fee. Many customers prefer to withdraw cash from the ATM and pay.

RBI’s report however concludes saying there is definitely a trend of using cards to make payments that by cash.

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