The share of currency in circulation (CIC) in payment systems has declined from 88% in FY16 to 20% in FY22 and is estimated to go down further to 11.15% in FY27, the report said.
“With the increase in digital transactions, this is the first time after 2002 that currency in circulation during the Diwali week shows a decline during the Diwali week, assuming that the marginal decline in 2009 was purely because of economic slowdown,” SBI Group chief economist Soumya Kanti Ghosh said in the report. “Over the years, the Indian cash-lead economy now has changed to smart-phone lead payment economy,” the report said.
Covid-19 forced people to embrace contactless digital transactions even as the government made a relentless push to formalise and digitalise the economy, the report noted.
Besides, interoperable payment systems like UPI, Wallets and PPIs have allowed simple and cheap digital money transfers for even those who don’t have bank accounts, spurring increased adoption.
The share of UPI in transaction value has jumped to 16% in FY22 from 0% in FY16, the report said, noting that though CIC is increasing with the rise in the economy the trend is declining.