Key Points
Even as post COVID pick up in digital transactions has slowdown the demand for cash in the country, a research paper by RBI economists says that cash is still a preferred as savings instrument for its 'store of value' and for precautionary purposes and hence demand for cash would rise as the economy grows the paper said...
This paper finds that the sustained growth in currency demand is influenced by the precautionary and store-of-value motives, while the use of cash as a payment medium continues to fall say Sakshi Awasthy, Rekha Misra and Sarat Dhal in a paper titled Cash versus Digital Payment Transactions in India: Decoding the Currency Demand Paradox published in its latest volume of Occasional Papers . The views however are that of the authors and not that of the central bank...
The lower return on alternative investments (or negative real return) during the period prior to 2022-23 might have translated into increased demand for non-interest-bearing assets like currency..
Overall, it is seen that digital payments are substituting the transactional demand for cash, but the store-of-value motive of holding cash remains intact, the paper said.. (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)..
