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Last Updated : Mar 18, 2017 11:32 AM IST | Source:

Is cash king or do digital payments lack the trust factor?

Latest RBI data suggest that measures implemented to push digital transactions haven’t been able wane citizens off the “touch and feel” of cash.

The adage "cash is the king"  was challenged on November 8, 2016 when the government machinery decided to wipe out around Rs 14 lakh-crore worth high-value denomination currency from the economy. More than three months later, citizens are now getting back into the pre-demonetisation cash comfort zone.

According to latest Reserve Bank of India data, currency in circulation increased to Rs 10.63 lakh crore at the end of February 17. This is an increase of 36 percent from Rs 7.81 lakh crore on December 9 — the lowest in the hands of public after demonetisation.

Further, notes in circulation was up by another Rs 300 crore in the 20 days and has been consistently rising around those levels since the first week of January.


RBI data show card usage at Point of Sale (PoS) terminals in January slumped 17 percent from the previous month while in value terms the reduction was 9 percent. In contrast, cash withdrawals at ATMs surged a massive 78 percent to Rs 1.5 lakh crore in January. The number of transactions were up by 13 percent.

Even though the government and mobile wallet firms have been pushing digital transactions, it seems the measures implemented haven’t been able wane citizens off the “touch and feel” of cash.

SBI Chairman Arundhati Bhattacharya said: “Today, the option of cash is back. Those uncomfortable with digital have gone back to cash; what has happened, I think, is quite normal.”

The resumption of cash exchange is visible from the fact that digital transactions have slowed after hitting highs in December.

Even as transactions on the UPI or United Payments Interface increased from 20 lakh in December to 42 lakh in January, the volume has remained almost similar in February.

In value terms, 957.5 million electronic or digital transaction accounted for Rs 104.05 lakh crore in December. However, the number of transactions fell to 870.4 million in January and further to 763.0 million last month. Monthly transaction values fell to Rs 97.01 lakh crore and Rs 92.60 lakh crore in January and February, respectively.

“We have to make the (digital) products and offerings so simple and convenient that people will get attracted to them. That takes a little time because again, UPI and BHIM are new products, they (the government) are working on it. In the next few months, these things will become better and better,” Bhattacharya said.

Digital transactions — Trust factor missing?

To put things in perspective, a Mumbai-based college student Vidhi prefers cash to digital transactions as there is certainty in the payment made. “I am glad cash is back. We travel by autos and buy food from roadside hawkers, they do not use online payment option. Also, there is more confidence in cash that the transaction is done,” she said.

Like Vidhi, another homemaker based in the city has the same complaints. “They demand cash. Also, there are data connectivity problems while making online payments.”

In a sudden announcement on November 8, Prime Minister Narendra Modi declared old Rs 500 and Rs 1000 notes as invalid as legal notes sucking out 86 percent of the currency notes from the system.

The subsequent cash crunch and the government’s incentives thereafter pushed citizens to use digital channels to make payments. With the rollback of incentives and cash coming back into the system, people have been quick to switch to their most-trusted for payment — the cash.

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First Published on Mar 14, 2017 04:15 pm
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