Growth in currency in circulation in the one year to October at Rs 2.7 lakh crore, or 9 percent rise, was higher than Rs 2.3 lakh crore, or 8.5 percent, in the same period previous year, according to the latest Reserve Bank of India data.
Some cash distribution companies have processed one of the highest amounts at ATMs this October. Also, cash continues to be the only payment settlement option for nearly 20% of the unbanked individuals who do not have bank accounts.
The nationwide lockdown in 2020 following the COVID-19 pandemic ushered in a behavioural change in the habit of payments and settlements with people moving to digital platforms in a big way, resulting in lesser dependence of cash thanks largely to the push by the government and policy makers to address the restriction of physical movements then.
But, data indicated that cash still continues to be an important method of settling transactions. Cash management company CMS’s Cash Index for ATM rose 9% year on year and 13% over the month of Sep’22. This index is a weighted index consists of two factors, the cash that goes it infuses via ATMs and cash that it collects from the retail channels and is based on data collected from 659 districts and 12,367 pin codes across the country. Total currency processed by CMS through its pan-India network in the month of October 2022 was Rs 1.13 lakh crore , higher ever for the company in a month, a statement by the company said.
All major states showed robust growth in cash withdrawals, CMS said. Large, urbanized states such as Maharashtra witnessed 17 percent growth, Karnataka (13%) and Tamil Nadu (11%) saw healthy double-digit growth in Oct’22 over Oct’21. Similar trends were also seen in upcoming developing states such as Bihar (14%) and Uttar Pradesh (13%), it said. The month also witnessed the CMS Cash Index for ATM channel hitting an all-time high indicating best Diwali ever.
Significantly, it is six years since the government banned Rs 500 and Rs 1000 currency notes this week which caused the currency in circulation plummet by nearly 50 percent from Rs 17.97 lakh crore on November 04, 2016 to Rs 8.98 lakh crore on January 06,2017. But over the six year period currency in circulation has nearly doubled to Rs 32.1 lakh crore.
Surveys also point that cash is still the preferred option in many areas. 76 percent of the household respondents said that they used cash for groceries, eating out and food delivery transactions in the last 12 months according to a survey of over 32,000 citizens across the country by community social media platform LocalCircles. Besides, most people have been paying cash for domestic staff services, personal services and for home repairs, etc. Interestingly, some respondents also had difficulties of accepting and enabling digital payments.
Property transactions emerged as the top area of cash usage from a value per transaction standpoint. 44 percent of those surveyed who bought a property in the last 7 years said cash was part of the transaction though the percentage of respondents paying cash for property transactions had come down, the survey found.