Mumbai: Even after five years after demonetization and digital push, the cash remains king as the currency in circulation (CIC) almost doubled to over Rs 29 lakh crore from about Rs 16 lakh crore in 2016, taking the ratio of currency in circulation to GDP to a new high of 14.5% in FY21 from 11.6% in FY16.



The increase occurred as the pandemic raised cash demand while shrinking the GDP.

The global pandemic created a panic amongst the population of India as households started holding more cash in hand for medical emergencies. CIC has been linked to GDP and is expected to grow in line with GDP in the coming years.

Digital Versus Cash

On the fifth anniversary of demonetization, the boom in all forms of digital payment — whether UPI, credit and debit cards or FASTag — continues, indicating that the transition to digital and the intensity of cash are not mutually exclusive.

Digital payments have increased by nearly threefold since FY18. The Reserve Bank of India's (RBI) digital payments index, which has 2018 as the base year at 100, has risen to 270. This index includes accounts for the proliferation of digital payments and the expansion of the payments infrastructure.

Even RBI's view of CIC suggests little correlation between CIC and digital payment penetrations and that CIC will grow in line with nominal GDP. As a percentage of GDP, CIC grew by three to five percentage points even as digital payments grew by more than 50% in most economies with high digital payment penetrations.

A report of the Committee on Deepening of Digital Payments in 2019 said,
"On the acceptance side, however, the committee notes that high-cost structures, including interchange fees, as well as limited financial service offerings, impede merchants from accepting digital payments. Cash - with its ease of usage, universal availability and acceptance, low cost to the consumer, and no requirement of KYC – continues to play a significant role in payments."

Cash Gets Boost This Festive Season


This festive season starting from Dushera, India's demand for cash and cash transactions has jumped. Historically, festival season cash demand remains high as many merchants depend on cash payments for end-to-end transactions.

Demand for cash has gone up this festive season as people are seen buying jewelry primarily using cash, and so are they paying for the purchases on e-commerce portals such as Amazon and Flipkart.

Around 15 crore population of the country is still unbanked, where the only mode of transaction is cash. Over 90% of e-commerce transactions use cash as a mode of payment in Tier 4 cities as compared to 50% in Tier 1 cities.

"Cash in India continues to be the dominant medium of transactions across age, gender, regions, and income groups. Despite COVID, the cash in circulation has grown at approximately 19.8% between March 2020 and March 2021 to approximately Rs 28.4 lakh crore. In FY21, the CMS network moved more than Rs 9.15 lakh crore in currency through its 63000+ ATMs that the company replenishes and the 40,000+ retail and enterprise chains, whose cash payments the company collects, processes, and banks every single day," Mr. Anush Raghavan, President – Cash Management Business, CMS Info Systems Ltd told ABP News.

CMS Info Systems Limited is India's largest cash management company.

'Dash To Cash,' A global Phenomenon:


In times of uncertainty, the global surge in currency in circulation following the pandemic has been described as a "dash to cash." The United States, Japan, UK, Hong Kong, and Singapore have all experienced this. Japan and Hong Kong have CIC of over 21% of the GDP, while Singapore has over 12% and the USA about 10%.