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Future of Cash: What latest RBI document says about currency in circulation

The Reserve Bank of India expects the currency in circulation to come significantly down in the next two years. In its ‘Vision 2019-2021’ for ‘Payment and Settlement Systems in India’ released this week, the central bank said, “While no specific target is considered for cash in circulation, the enhanced availability of PoS infrastructure is expected to reduce demand for cash and thus over time achieve reduction in Cash in Circulation (CIC) as a percentage of GDP.”

In the last three years, the digital transaction turnover w.r.t. GDP has grown from 7.14 in 2016 to 8.42 in 2018. The RBI document said, “the digital payment transaction turnover vis-à-vis GDP (at market prices-current price) increased from 7.14 in 2016 to 7.85 in 2017 and further to 8.42in 2018. The turnover in payment transactions (after including CCIL figures and paper) visà-vis GDP (at market prices-current price) increased from 14.41 in FY 2015-16 to and 14.73 in FY 2016-17 and further to 15 in 2017-18.”

The RBI has proposed a two-pronged approach to realise the ‘Vision 2021’. First, providing exceptional customer experience. Second, enabling an ecosystem for this customer experience.

By 2021, the RBI hopes an “Accelerated growth in individual retail electronic payment systems, both in terms of number of transactions and increased availability.”

Payments systems like UPI/IMPS are expected to register an annualised growth of 100%, while NEFT is expected to grow by 40% over the vision period. Moreover, a four-fold increase in the number of transactions is expected from Rs 2069 crore in December 2018 to Rs 8707 crore in December 2021. Also, the digital payment transaction turnover vis-à-vis GDP (at market prices-current price) is expected to further increase to 10.37 in 2019, 12.29 in 2020 and 14.80 in 2021.

The RBI document says that the usage of digital mode of payments of goods and services through an increase in debit cards at PoS is expected to grow by 35% in the vision period.

The vision document proposes to set up a Self-Regulatory Organisation (SRO) at the payment service industry level. This ” facilitate the setting up of an industry-wide 24×7 helpline and the large-scale use of technology for customer assistance and complaint redressal,” RBI said.

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