Currency Usage Increase By 64% Since Demonetization; Rs 29 Lakh Cr Of Notes In Usage Right Now
Five years after the demonetisation drive abruptly began on November 8, 2016, notes in circulation (NIC) in value terms have increased by 64% as of October 29, 2021.
Data from RBI reports that NIC in terms of value shot up to ? 29.17 lakh crore, surpassing the ? 17.74 lakh crore recorded on November 4, 2016.
There are two opposing trends here.
While cash circulation has been on an upward trend, the pace has been slow.
Digital payments on the other hand have been growing in popularity, but not enough to dent the preference for cash.
Was It Worth It?
This means that the other goal behind demonetisation, which was to encourage digital payments, has not affected cash transactions much.
After demonetisation, 99.3% of the valueless notes made its way back to the banking system, i.e. Rs 500 and Rs 1,000 notes worth Rs 15.31 lakh crore, out of Rs 15.41 lakh crore.
This triggered a spat between the government and the opposition.
Former finance minister P Chidambaram called the move an “exercise in futility” and that the economy lost 1.5% points of growth- amounting to a loss of Rs 2.25 lakh crore a year.
NIC went up last year since people wanted to build up their cash reserves amidst the uncertainties of the pandemic and sudden lockdowns.
Digital payments also saw a surge with wider adoption by the public, especially through different modes such as plastic cards, net banking and Unified Payments Interface (UPI).
UPI in particular is quickly emerging as a major payment medium, even with NICs seeing an upward trend.
NIC has increased 16.8% in value and 7.2% in volume during 2020-21
The figures the previous year were 14.6% and 6.6% in value and volume respectively.
RBI’s pilot survey on retail payment habits found that for transactions up to ?500, cash is used predominantly.
Digital payments are inaccessible to about 15 crore people who do not have a bank account.
In tier four cities, 90% of online transactions are done by cash, compared to 50% in tier one cities.
The festive season has only contributed to further rise in cash demand since scores of merchants still rely on cash payments.
UPI On The Rise
UPI transactions which was launched in 2016 has registered month-on-month growth barring a few instances.
The transactions in value terms stood at over ?7.71 lakh crore or over $100 billion in October 2021.
421 crore UPI transactions were conducted just last month.