Digital payment transactions were a popular mode of payment but the value of cash in circulation showed an upward trend according to data released by the Reserve Bank of India, the notes in circulation (NIC) rose from ₹17.74 lakh crore on November 4, 2016, to a 64% increase at ₹29.17 lakh crore on October 29, 2021 which shows that the Indian economy still values cash transactions even after five years since demonetization by the BJP government.
Although demonetization was touted as a way to curb black money and promote digital payment methods, cash transactions remained popular although growth has been somewhat slower. Digital payments like net banking, UPI and card payments have shot up in popularity, especially during the pandemic period with more and more people opting for cashless payment. In October 2021, the transactions in value terms stood at over ₹7.71 lakh crore or over $100 billion. A total of 421 crore UPI transactions were conducted last month.
Another possible reason for the popularity of cash transactions is the lack of bank accounts in the population which means many depend on cash transactions to conduct their daily business. The RBI has also suggested that the NIC amount is also expected to grow with the GDP of the country and is not correlated to growth in digital payments. NIC to GDP ratio has been 10-12% till about FY20, and is expected to go up to 14% by the end of this financial year.
Value of notes grew by ₹2,28,963 crore on October 29, 2021, from ₹26.88 lakh crore as on October 30, 2020. The year-on-year increase on October 30, 2020, was ₹4,57,059 crore. The data revealed the year-on-year increase in NIC on November 1, 2019, was ₹2,84,451 crore. The banknotes in circulation had increased by 16.8 per cent and 7.2 per cent in value and volume, respectively, during 2020-21. They had registered a rise of 14.7 per cent and 6.6 per cent, respectively, during 2019-2020.