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Currency notes in circulation maintained an upward curve last fiscal even five years after demonetisation, albeit at a slower pace, even as digital payments continue to grow in popularity. More and more people are choosing cashless payment modes, but that has not lessened the preference for cash yet.

Banknotes in circulation surged during the financial year 2020-21 as many people preferred to hold cash amid the disruption to normal life and economic activities due to the Covid-19 pandemic.

Digital payments through different modes are on the rise, including plastic cards, net banking and Unified Payments Interface (UPI), shows official data. UPI by the National Payments Corporation of India (NPCI) is fast emerging as a major medium of payment in the country. Despite the growing popularity of digital payments, currency notes in circulation are still in the upward curve, although not at a fast pace.

Also Read: Building a UPI model to prevent digital monopolies

According to the latest Reserve Bank of India (RBI) data, in value terms, the notes in circulation (NIC) rose from 17.74 lakh crore on November 4, 2016, to 29.17 lakh crore on October 29, 2021. They grew by 2,28,963 crore on October 29, 2021, from 26.88 lakh crore as on October 30, 2020. The year-on-year increase on October 30, 2020, was 4,57,059 crore. The data revealed the year-on-year increase in NIC on November 1, 2019, was 2,84,451 crore.

The banknotes in circulation had increased by 16.8 per cent and 7.2 per cent in value and volume, respectively, during 2020-21. They had registered a rise of 14.7 per cent and 6.6 per cent, respectively, during 2019-20.

NIC had grown at an average growth rate of 14.51 per cent year-on-year from October 2014 till October 2016, the month preceding the demonetisation.

On November 8, 2016, Prime Minister Narendra Modi had announced the demonetisation of old 1,000 and 500 banknotes. This controversial decision was meant to promote digital payments and curb black money flows.

The unforeseen decision to demonetise the two high denomination currencies lead to long queues outside banks. Several sectors of the economy, especially the unorganised segment, was hit hard by the decision.

Also Read: How to setup UPI autopay for your recurring payments

The central government had told he Parliament during the last session that the quantum of banknotes in the economy broadly depends on GDP growth, inflation, replacement of soiled banknotes and growth in non-cash modes of payment. Barring the Covid-19-hit 2020-21 financial year, the Indian economy has recorded a positive growth rate.

Meanwhile, the UPI was launched in 2016, and the transactions have been growing month-on-month barring a few blips. In October 2021, the transactions in value terms stood at over 7.71 lakh crore or over $100 billion. A total of 421 crore UPI transactions were conducted last month.

The RBI had conducted a pilot survey on retail payment habits of individuals in six cities between December 2018 and January 2019, results of which were published in April 2021. The RBI Bulletin indicates that cash remains the preferred mode of payment and for receiving money for regular expenses. For small value transactions up to 500, cash is used predominantly.

Also Read: RBI alerts people against buying, selling old banknotes, coins

After withdrawing the old 500 and 1,000 notes as part of demonetisation, the government had introduced a new 2,000 currency notes. It also introduced a new series of 500 notes. Later, a new denomination of 200 was also added.

In value terms, the share of 500 and 2,000 banknotes together accounted for 85.7 per cent of the total value of banknotes in circulation as on March 31, 2021, as against 83.4 per cent as on March 31, 2020.

However, no indent for 2,000 note was placed with Bharatiya Reserve Bank Note Mudran Private Ltd (BRBNMPL) and Security Printing and Minting Corporation of India Ltd (SPMCIL) during 2019-20 and 2020-21.

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