India Hit Hard With Its Currency Operations Cost


BENGALURU: India being one of the most cash intensive economies in the world has to bear a unique burden where the country has a cash-to-GDP ratio of 12 percent which is four times than the markets of Brazil (3.93 percent), Mexico (5.3 percent) and South Africa (3.73 percent).  On one hand, ever year 21, 000 Cr is spent on currency operation costs by RBI and other commercial banks, on the other hand only the Delhi citizens are spending 9.1 Cr and 60 lakh hours in collecting cash, reports TOI

bank notesThe two major reasons India has to pay a high price are, firstly, frequent need for reissue of notes. As the notes are mishandled they disappear after few days or within a year, as a result even the low cost notes need to be issued again which again costs a lot.

Secondly, it is the need to upgrade security features and replace the old notes. It involves a lot of cost in pulling out the old notes from the market and issue the new ones.

Another reason for involvement of so much cash for payment is that, one third of India’s population lack a proper back account and thus they have to depend on cash for all their payments. An increase in electronic payments has been noticed since 2007 and its share has increased from 2.6 to 6.8 percent. But it should be noted that this growth has helped the commercial sectors better than the retail clients.

According to RBI, 15, 400 bank notes were issued globally, among which 5400 Crore were by China and almost 2000 Crore by India. An estimation has been made about the next three years where 16, 000 crore banknotes will be issued worldwide, 16, 600 by China and 17, 300 by India which is extremely high.

Vikas Varma, Area Head, South Asia, MasterCard says, “The steps taken by RBI over the years strive to make the idea of financial inclusion a reality. Innovations in the electronic space not only deliver greater transparency but more importantly, they simplify transactions, enhance security, increase efficiency and have the potential to dramatically reduce the costs.”

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