At the same time, the RBI report also noted that the use of cards for making payments, as opposed to being used just for cash withdrawals, is on the rise.
Cash withdrawals from ATMs in India increased over the past five years, the Reserve Bank of India (RBI) said in a report on Monday. It added that India is next only to China in terms of cash withdrawals from ATMs. “However, the percentage of cash withdrawals to GDP has been constant in India at around 17%,” the central bank said in the report titled ‘Assessment of the progress of digitisation from cash to electronic’.
Further, rising at a compound annual growth rate (CAGR) of 9% in terms of volume and 10% in terms of value, ATM withdrawals have been growing more slowly compared with digital payment transactions. Digital transactions grew at a CAGR of 61% by volumes and 19% by value, indicating a shift towards digitisation, said the RBI. Also, the infrastructure for cash withdrawal — ATMs — have grown at a much slower pace, growing at a CAGR of just 4% over the past five years.
The report observed that during the period under review, the demand for high-value denominated currency has outpaced low-value denominated currency and this phenomenon may indicate that cash is increasingly used as a store of value and less for making payments.
The central bank cited a report by Credit Suisse, which stated that 72% of India’s consumer transactions take place in cash, double the rate as in China. According to the Credit Suisse report, many merchants, especially in rural areas, remain unable or unwilling to accept digital transactions due to issues around network connectivity issues and a reluctance to pay charges for what are often low-value transactions.
At the same time, the RBI report also noted that the use of cards for making payments, as opposed to being used just for cash withdrawals, is on the rise. “Debt and credit card based payments registered a CAGR of 44% and 40% in terms of volume and value, respectively. The adoption of card payments has been supported by innovations in the form of contactless payments and tokenisation technologies, contributing to the growth. In addition, the use of cards for payments is increasing vis-a-vis their use for withdrawing cash,” the report said.