The Reserve Bank highlighted the crucial role of cybersecurity, customer protection, and cost-effectiveness in sustaining the increased adoption of digital payments, which was accelerated by the Covid-19 pandemic. The paper, titled ‘Cash versus Digital Payment Transactions in India: Decoding the Currency Demand Paradox,’ emphasised that while the transactional use of cash is declining, its store-of-value role remains intact.
Despite the temporary surge in currency demand during the pandemic, driven by precautionary motives, the paper emphasised the need for concerted efforts to maintain the momentum towards digital payments. It stressed the importance of ensuring cost-effectiveness in payment modes and acceptance infrastructure from both the demand and supply sides, including consumers, merchants, and intermediaries. Universal access to essential enablers such as smartphones and internet connectivity was also identified as a key factor.
Authored by Sakshi Awasthy, Rekha Misra, and Sarat Dhal from the RBI’s Department of Economic and Policy Research (DEPR), the paper called for efforts to enhance financial inclusion and literacy while safeguarding cybersecurity and consumer protection.
Despite the observable traction in digital payments, the paper acknowledged the enduring preference for cash transactions, especially among the population inclined to transact and save in cash. It highlighted the multifaceted role of cash, serving as the foundation for various payments, facilitating transactions between formal and informal sectors, and catering to financially excluded individuals lacking digital awareness, reported ET.
The paper also noted that the usage of digital payments is concentrated in regions characterised by higher levels of development. It emphasised that the success of digitalization goes beyond mere cash substitution, impacting economic growth, financial market development, household financial well-being, and effective governance.
While acknowledging the ongoing expansion of digital payments, the paper suggested that the high cash usage observed during the pandemic might not lead to a permanent shift, considering the moderated growth in currency demand post-pandemic.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
