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Six months since demonetisation: Economy back on track, digital transactions surge

The demonetisation of high denomination currencies was a watershed moment for all the digital payments players, including names like PayTm, MobiKwik and FreeCharge, who witnessed a surge in transaction volumes on their platforms.

May 09, 2017 / 10:43 PM IST
Four years after the government's decision to

Four years after the government's decision to "demonetise" Rs 500 and Rs 1,000 notes, data suggest currency circulation in value and volume continuously increasing, a massive rise seen in the digital payments transaction, and seen a sharp decline in counterfeit notes detected in the banking system, according to data available on RBI. Demonetisation was announced by Prime Minister Narendra Modi on November 8, 2016, citizens were given 50-days to deposit old notes in banks and post-offices by December 30.

Soon after Prime Minister Narendra Modi banned usage of Rs 500 and Rs 1000 notes on November 8 last year, there was a hue and cry from experts worldwide, who deemed the entire exercise futile and felt it would lead to a slowdown in the country's economic growth.

Fast forward six months and the country has almost completely recovered from the cash crunch, with hardly any effect on India's economic growth.

According to RBI data, around Rs 17.97 lakh crore of currency was in circulation a month before demonetisation. Till April 28, almost 80 percent of this, which is Rs 14.32 lakh crore, is already back in the system.

A Hindustan Times report says that the total withdrawals from ATMs in March were almost equal to withdrawals in the same period last year. According to a Business Standard survey, ATMs always have cash, save for the weekends, when people find it difficult to find an active ATM.

As cash withdrawals seem to normalise, digital transactions have not seen sharp declines as was expected by some earlier.

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The demonetisation of high denomination currencies was a watershed moment for all the digital payments players, including names like PayTm, MobiKwik and FreeCharge, which witnessed a surge in transaction volumes on their platforms.

Data compiled by Business Standard shows transaction volumes for prepaid payment instrument (PPI) - including a few e-wallet - firms jumped almost 50 percent after demonetisation to 87.8 million transactions from 59 million.

Payments via PPIs peaked in March, hitting 90 million in volumes. And while they declined to 89 million in April, the momentum still looks strong.

UPI payments also witnessed a tremendous rise to Rs 2,199 crore in April, from just Rs 91 crore in November.

The economic growth was also forecasted to decline in the financial year 2017 following the note ban to 6.6-6.8 percent. However, the economy grew at 7.1 percent in FY17, as projected by the Central Statistics Office (CSO).

While the country is no more reeling in the after affects of the note ban, the government or the RBI, have still not revealed whether the note ban was successful in getting rid of the menace of black money from the country.

They have failed to disclose how much money was deposited into the banks till December 30. According to media reports, almost Rs 14 lakh crore of the banned notes came to the banks, with only Rs 75,000 crore having been extinguished from the banking system.
first published: May 9, 2017 10:43 pm

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