Our cash-led economy is fast changing to a smartphone-led payment economy, with the Currency in Circulation (CIC) declining for the first time in last two decades during the Diwali week, according to Ecowrap, State Bank of India’s economic research report.
“The Indian economy is undergoing a structural transformation. In a remarkable development, for the first time in 20 years, currency in circulation declined during the Diwali week. The innovations in technology has changed the Indian payment system.
“...A lower currency in circulation is also akin to a Cash Reserve Ratio (CRR) cut for the banking system, as it results in less leakage of deposits, and it will impact monetary transmission positively,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.
According to SBI Research, the weekly movement in CIC during the Diwali week shows a decline of ₹7,600 crore in 2022, against an increase of ₹43,800 crore and ₹44,000 crore in 2020 and 2021, respectively.
The trends in the total payments system are revealing, as the share of CIC in payment systems has been declining from 88per cent in FY16 to 20per cent in FY22, and is estimated to go down further to 11.15per cent in FY27, per the report.
Consequently, the share of digital transactions has increased from 11.26 per cent in FY16 to 80.4per cent in FY22, and is expected to touch 88 per cent in FY27.
The success of the digital journey is primarily due to the relentless push by the government to formalise and digitalise the economy, noted Ghosh.