Currency in circulation during this Diwali week declined for the time in 20 years, SBI Research said in its report ‘Ecowrap’. It said that innovations in technology have changed the Indian payment system and the Indian cash lead economy has now changed to a smartphone lead payment economy.
“In a remarkable development, for the first time in 20 years, currency in circulation declined during the Diwali week. Innovations in technology have changed the Indian payment system. Over the years, the Indian cash lead economy now has changed to a smartphone lead payment economy. A lower currency in circulation also is akin to a CRR cut for the banking system, as it results in less leakage of deposits and it will impact monetary transmission positively,” according to SBI Ecowrap.
It said that according to the latest retail digital transactions data, NEFT holds a share of 55 per cent in value terms and most of the transactions are done either at branch or through internet banking.
“However, if we look only transactions done through smartphones like UPI, IMPS & e-wallet, they have a share of around 16 per cent, 12 per cent and 1 per cent, respectively,… Small payments through UPI and e-wallets hold around 11-12 per cent in the payment industry,” SBI Research said in the report.
In the total payment system, digital transactions have been defined as the transactions in IMPS, UPI, and PPI; cash transactions as CIC, according to the report.
“The trends are revealing, as the share of CIC in payment systems has been declining from 88 per cent in FY16 to 20 per cent in FY22 and is estimated to go down further to 11.15 per cent in FY27. Consequently, the digital transactions share is continuously increasing from 11.26 per cent in FY16 to 80.4 per cent in FY22 and is expected to touch 88 per cent in FY27,” it said.
The report also said the success of the digital journey is primarily due to the relentless push by the government to formalise and digitalise the economy.
“Over the years, the system has expanded rapidly with new innovations like QR code, NFC etc and has also seen the swift entry of big tech firms in this industry,” the report said.
In October, transactions through UPI rose 7.7 per cent to 730 crore and the total value stood at more than Rs 12.11 lakh crore. In September, there were 678 crore UPI-led digital transactions worth Rs 11.16 lakh crore.
The number of instant interbank fund transfer through IMPS (Immediate Payment Service) in October stood at 48.25 crore and the value was at Rs 4.66 lakh crore. In terms of transactions, it was higher by 4.3 per cent compared to September, according to the latest monthly data from the National Payments Corporation of India (NPCI).
The NETC FASTag, which facilitates automatic toll collection at NHAI’s toll booths across the country, registered a 9.3 per cent growth in the number of transactions compared to 28.3 crore in September. The corresponding value of transactions stood at Rs 4,451.87 crore in October as against Rs 4,244.76 crore in September.
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