Currency in circulation declined in week: the first time that happened in decades and contrary to the trend in the when people hoard cash for spending.


According to SBI Research, cash in circulation (CIC) dropped by Rs 7,600 crore in the week starting October 24 in Delhi. It is important note that, dropped marginally by Rs 950 crore during week in 2009.


“The innovations in technology has changed the Indian payment system. Over the years, the Indian cash lead economy now has changed to smart-phone lead payment economy. A lower currency in circulation also is akin to a cut for the banking system, as it results in less leakage of deposits and it will impact monetary transmission positively,” the report said, referring to cash reserve ration.


The pandemic has led to the accelerated adoption of digital payments in the country, which is evident from the fact that Unified Payments Interface (UPI)–India’s flagship retail digital payments platform–is recording new highs in usage every month. Separately, credit card spending has consistently topped the Rs 1 trillion mark.


“With the increased acceptance of digital payments in the country, the over-reliance on cash is slowly fading away,” the report said.


Since the inception of in 2016, monthly transactions have been increasing and touched Rs 84 trillion in FY22.


“We believe that the increase in digital transactions may result in a decline in money multiplier, even though the overall measure of broad money has been expanded. In particular, there has been a substitution from currency and much of it has gravitated towards the digital mode of payments,” the report said.


Data shows, the share of in total payment system has been declining from 88 per cent in FY16 to 20 per cent in FY22 and estimated to go down further to 11.15 per cent in FY27. Consequently, the digital transactions share is continuously increasing from 11.26 per cent in FY16 to 80.4 per cent in FY22 and expected to touch 88% per cent in FY27.



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