Impact of Digital Payments, ET BFSI

Mumbai: For the second consecutive time in 20 years, the currency in circulation (CIC) dipped during Diwali week as citizens shifted to digital modes of payment to make their festival purchases.

Data released by RBI on Wednesday revealed that during the week ended November 17, currency in circulation dropped by Rs 5,934 crore to Rs 33.6 lakh crore. This year, the Diwali festival occurred between November 10 and November 14.

Currency in circulation during the current financial year has declined by Rs 22,721 crore. While some of the decline is due to the withdrawal of Rs 2,000 crore banknotes, bankers say that this process was completed in October, with 97% of the notes returned.

According to Soumya Kanti Ghosh, group chief economic adviser, SBI, the cash decline reflects the power of digital transactions. “With the increased acceptance of digital payments in the country, the over-reliance on cash is slowly fading. In October 2023, UPI has increased (month-on-month) by 85.3 crore transactions of Rs 1,36,600 crore in value terms,” he said.

An Ecowrap research report by SBI analysed the movement of currency in circulation during Diwali week for the previous two decades. In every year, the CIC has gone up, barring 2009, following the global financial crisis. In 2021, Diwali saw CIC increase Rs 44,000 crore during the festival week. A year earlier, during the pandemic, it rose by Rs 43,800 crore.

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