In March of last year, Prime Minister Narendra Modi gave a speech to the Indian diaspora in Berlin, informing the enthusiastic audience of India’s advancements in the digital payments environment. According to him, 40% of all real-time digital payments made globally in 2021 occurred in India. PM Modi has even more grounds for pride, if a new State Bank of India (SBI) report is to be accepted.
Insufficient cash flow during the boom
It’s a surprising phenomenon that during Diwali week, when cash transactions are often at their peak, currency in circulation (CIC) decreased for the second year in a row, a record that spans 20 years. A decline like this wasn’t seen since the week of Diwali in 2009. However, the global and Indian economies were slowing down at the time, which contributed significantly to the Rs 9.5 billion decrease.
It is generally accepted that an increasing number of Indians are selecting digital payments over cash transactions, which accounts for the decline in cash transactions during Diwali month this year despite strong economic activity. This year’s October festivities saw a staggering 853 million more UPI transactions, totaling Rs 1,366 billion.
SYROCKET DIGITAL PAYMENTS
Over-reliance on cash is no longer an option in India due to the growing adoption of digital payments. India Stack, a complete digital identification, payment, and data management system that connects banks, fin-techs, and your e-wallet, is the foundation of India’s digital payment revolution. It is revolutionizing the way we purchase and sell goods.
Digital payments may be made using a variety of methods, including UPI, IMPS (immediate interbank electronic money transfer service) via mobile phones, and NEFT (National Electronic money Transfer). But UPI has changed the game for the average person. 75% of all transactions in the payment sector are UPI transactions in terms of volume.
More good news for the economy: UPI saw a strong surge of 853 million transactions in the holiday month of October this year, when Diwali sales typically drive more transactions. In other words, during the month of Diwali, 853 million more consumers choose to use UPI instead of cash for their payments.
Throughout 2022, about 74 billion transactions totaling over Rs 126 trillion were made using UPI.
RBI IS GOING TO PRINT MORE NOTES SOON?
Prime Minister Narendra Modi’s vision of Digital India, which has been ridiculed by many in the Opposition, including former Finance Minister P Chidambaram, is directly reinforced by the statistics on increased UPI transactions. However, in 2023, the unprecedented decline in cash transactions combined with the vast volume of UPI transactions has validated the Modi government’s bold initiative.
The Reserve Bank of India (RBI) may create fewer currency notes if the trend continues, according to the SBI research paper. “This benefits the government and RBI equally since it reduces the need for cash and saves seignorage expenses. This implies that all current analyses of how currency leakage affects bank deposits and liquidity estimations may undergo a fundamental reorientation in the future, according to the findings of SBI’s Ecowrap study.
When he said in February of this year that “many experts are estimating that very soon India’s digital wallet transactions are going to overtake cash transactions,” Prime Minister Narendra Modi seems to have anticipated this trend.