Money & Banking

Cash is still ‘King’ as digital divide between Bharat and India continues

Suresh P Iyengar Mumbai | Updated on October 27, 2021

Cash in circulation rose by ₹11,115 cr in the week-ended October 15

The demand for currency, which has seen a steady surge with the onset of festival season this month, has once again proved that cash is king as the digital divide between Bharat and India still remains startling.

Cash in circulation (CIC) increased by ₹11,115 crore in the week-ended October 15 to ₹29,25,263 crore against ₹29,14,148 crore logged on October 8, as per the latest RBI weekly statistics report.

The CIC is up nine per cent at ₹29,25,263 crore till October 15 this year compared to ₹26,79,937 crore logged in October 16, 2020.

In fact, currency with the public has increased by ₹63,103 crore to ₹28,14,931 crore as of September 24 against ₹27,51,828 crore as of March-end, as per RBI data.

Historically, the cash in circulation to GDP was between 10-12 per cent till FY20. However, post the Covid breakout and increase of cash in the ecosystem, CIC to GDP has inched up to 15 per cent in FY22 and is expected to remain elevated at 14 per cent by FY25.

Rise in cash requirement

The CMS Cash Index shows significant increases of cash requirement in the economy with the onset of festive season as has been happening in the past three years since 2018. CMS Cash Index shows a jump of 9-19 per cent in cash in the last three years. Rajiv Kaul, Chief Executive Officer, CMS Info Systems, one of the largest cash management companies said cash in India continues to be the dominant medium of transactions, across regions and income groups.

He said that in FY21, the CMS network moved over ₹9.15 lakh crore in currency through over 63,000 ATMs that the company replenishes and over 40,000 retail and enterprise chains, whose cash payments the company collects, processes and banks every day.

Demand for cash is expected to intensify in the coming weeks and during Diwali. Historically, during festival season, the cash demand remains high as large number of merchants still depend on cash payments for end-to-end transactions.

Cash remains a major mode of transaction with about 15 crore people yet to have a bank account. Moreover, 90 per cent of e-commerce transactions use cash as a mode of payment in tier four cities compared to 50 per cent in tier one cities.

Sanjay Mehta, CEO, Amol Readymade said though online payments at shops have increased, many customers shopping worth higher amounts still prefer to pay in cash for reasons best known to them.

Published on October 27, 2021

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