Surabhi With restricted movements amid the pandemic, many Indians preferred to shop online from their homes and pay digitally. What’s interesting is that while digital payments have risen understandably during the lockdown period, so has the usage of cash.


RBI data reveal that notes in circulation amounted to ₹26,56,476 crore as on September 25, 2020, which is nearly 23 per cent higher than ₹21,60,124 crore as on September 27, 2019. It is also an increase of over 13 per cent from ₹23,49,715 crore in March 31 this year.

“The demand for currency started to increase in the wake of the heightened uncertainty caused by the Covid-19 pandemic,” the RBI had noted in its Annual Report 2019-20, adding that the value and volume of banknotes in circulation increased 14.7 per cent and 6.6 per cent, respectively, last fiscal.

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However, notes in circulation declined by ₹7,540 crore between September 18 and September 25 this year, and as much as ₹13,412 crore since September 11, when it stood at ₹26,69,888 crore.

Digital payments zoom

Data from the National Payments Corporation of India (NPCI) reveal that digital payments are back at pre-Covid-19 levels as people continue to prefer contactless payments.

There are also concerns about the virus spreading through touch, inducing people to avoid using cash.

As many as 180 crore transactions, amounting to ₹3.29-lakh crore, took place on the Unified Payments Interface (UPI) platform in September, against 161 crore transactions, involving ₹2.98-lakh crore, in August.

Also read: Digital payment transactions surge in lockdown to surpass pre-Covid levels

The Immediate Payment Service (IMPS) also touched an all-time high in September, totalling 2.79 crore in numbers and ₹2.48-lakh crore in value. Similarly, payments through Bharat Bill Pay soared to 2.31 crore in September, amounting to ₹3,920.83 crore.

Anecdotal data from bankers suggest that even debit and credit card spends by September-end had started returning to the pre-Covid-19 levels of January and February although a lot of payments are on e-commerce sites, with almost zero spends on earlier big-ticket categories such as travel and hospitality.

The data is significant, given that demonetisation of high-value currency in November 2016 was expected to reduce dependence on cash while promoting digital payments. As on November 4, 2016, notes in circulation had been at ₹17,74,187 crore. Currency in circulation is currently 50 per cent above the pre-demonetisation level.

Economic uncertainty

Experts point out that cash withdrawals have continued amid the pandemic as people seek to keep some currency notes in hand for emergencies.

“There is a penchant for Indians to hold cash, especially in the economic uncertainty over the last six months. But in metro cities, a lot of transactions are being done through digital channels as people stay home. The significant aspect is that at a time when overall economic activity has come down, the number of transactions has increased,” noted Madan Sabnavis, Chief Economist, CARE Ratings.

Rural demand

“Cash in circulation broadly grows at the same rate as nominal GDP growth, and I expect that it will continue to grow,” said K Srinivas, MD and CEO, BTI Payments. “After a dip in the lockdown months, ATM disbursals rose from June onwards. Our network of 6,500 ATMs disbursed nearly ₹3,500 crore in June.” He added that there continues to be robust demand for cash in rural areas.

Rustom Irani, MD and CEO of Cash Business, Hitachi Payment Services, also said that more people may be hoarding cash due to the economic uncertainty. “However, cash disbursals at ATMs are still 25-30 per cent lower than pre-Covid-19 levels,” he said.

Payments players point out that there is a lot of untapped potential even as more people have started adopting digital payment channels.

A recent global survey by Standard Chartered revealed that 87 per cent of people in India (64 per cent globally) now expect their country to go fully cashless. This is the highest proportion of any country surveyed, it had said, adding that a majority expects this to happen by 2025.

A recent report by ICICI Securities revealed that the pace of digital adoption across channels and touchpoints has accelerated and the digital mode constitutes about 87 per cent of retail payments including NEFT.

“Contactless payments (UPI) witness remarkable momentum accounting for 24 per cent of overall payments,” it had noted, adding that the value transacted on the mobile banking platform accounted for about 20 per cent of all payments.