Payments, Banking and Cost implications of cash – India


Electronic Payments have always intrigued me. I have written about this in the past. I was reading through a few more documents on electronic payments and read through the Reserve Bank of India Vision Document on Payments. Quite an insightful document in terms of statistics. However, my feeling was it doesn’t quite clearly layout the strategic framework to be adopted for payments in India. SOme statistics from the vision document and some other sources.

 Penetration of banking services
  • Of the six lakh villages in India, the total number of villages with banking services stands at less than one lakh villages as at end March 2011 and nearly 145 million households are excluded from banking.
Penetration of Electronic payment
  • Only 0.6 million of the 10 million plus retailers in India have card payment acceptance infrastructure.
  • Mid-2011, the number of non-cash transactions per person stands at just 6 per year.
  • 32% of e-commerce takes place through the system of “cash on delivery” (COD) NOT online payment.
 Other numbers:
  • The Indian bill payment market is a US$ 160 billion market. Indian households pay on an average 50 -55 bills a year. Among the electronic payments infrastructure, ECS occupies a 50% share followed by cards and bank account funding.
  • It is estimated that Government subsidies alone constitute more than Rs. 2.93 trillion and if these payments are effected electronically, it may translate to 4.13 billion electronic transactions in a year.
  •  The penetration of ATMs is 63 per million population and that of PoS terminals is 497 per million population
 Banking Infrastructure
  • Today, the banking infrastructure in the country consists of 80,000 bank branches, 1,50,000 post offices, 88,000 ATMs, and 500,000 POS machines. Of these, the rural banking infrastructure only consists of about 30,000 bank branches and 1,20,000 post offices. In comparison, there are more than 10 lakh telecom retailers that operate throughout the country.
  • 18 million outstanding credit cards and 228 million debit cards.
 How much cost does the economy bear to support a cash economy?
Cost of cash to the economy is 5-7% of GDP.
-costs for rbi  include printing currency, currency chest management, and wear and tear
-cost for bank include cash logistics, cash management, security, storage, and the opportunity cost of idle cash in branches and ATMs
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