Case Against Cash

Can you imagine a day without cash?

- Taru Bhatia

The answer is an obvious ‘no’. The rustle of notes and jingle of coins still have the power to light up any face. In fact, more than 99 percent of transactions by volume are still in cash payments in India, according to a McKinsey Global Insights report. Some argue that this overdependence on physical money is due to challenges like inaccessible banking services, lack of infrastructure to support non-cash payment and internet connectivity, which continue to persist, especially in the rural and remote regions of India. Others say that Indians are simply cash-obsessed.

But this obsession is costing a fortune to the economy. The Reserve Bank of India (RBI) and commercial banks annually spend ₹21,000 crore ($3.5 billion) to print and circulate currency notes and coins, and to keep them safe. Citizens of Delhi alone spend ₹9.1 crore – and 60 lakh hours – to withdraw and manage cash, according to a 2015 report by the Institute for Business in the Global Context.

"If you follow the traditional process of creating brick-and-mortar [bank] branches, giving credit, deputing officials, that's a very tardy process and the cost of transaction will be very high. Digital transactions can help in radically reducing the cost of transactions,” suggested Amitabh Kant, CEO, NITI Aayog, at the Digital Payments conference organised by Observer Research Foundation (ORF) in early October.

Cash, however, is slowly but surely going out of fashion thanks to technology. It started with credit and debit cards (plastic money), and with the rise of information and communication technologies, soon there were many more options to replace notes and coins: internet banking, mobile banking and digital wallets.