As uncertainty prevails due to the coronavirus pandemic, people have stacked cash like never before, taking the currency with the public to a record high level. The currency with the public stood at over Rs 25 lakh crore by the week ending May 22, 2020, according to RBI’s weekly supplement report. This is a rise from Rs 23.5 lakh crore by the week ending March 31, when the nationwide lockdown just started. Even as digital transactions witnessed a substantial rise after Prime Minister Narendra Modi demonetised high-value currency notes on November 8, 2016, the usage of cash is still on a rise, that too at a significant pace.
To put it in context, the currency with the public was Rs 17 lakh crore by the week ending October 18, 2016, which has shot up by Rs 8 lakh crore in mere three-and-a-half years. The coronavirus-led lockdown played a major role in the rise of currency with the public. As lockdown was new to Indians, the uncertainty over how the things will work out forced people to go for panic buying of groceries, other essential items, and hoard cash.
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Even now, when the lockdown is almost lifted and the operations of most of the businesses and industries are allowed, the uncertainty encompassing the market has kept consumer confidence at a low level. Following the low confidence, financial crunch, and rising number of coronavirus cases, increasing liquidity by holding more cash has been perceived as the most secure option.
Meanwhile, to discourage extensive usage of cash, the Reserve bank of India today announced the creation of Payments Infrastructure Development Fund (PIDF), which is aimed at establishing adequate facilities to execute digital transactions. The fund will be used to deploy Points of Sale (PoS) infrastructure in tier-3 to tier-6 centres and north-eastern states. RBI will make an initial contribution of Rs 250 crores to the PIDF, and the remaining contribution will be done by card-issuing banks and card networks operating in the country.