Cash withdrawals at ATMs rise 235% since demonetisation

Cash withdrawn using debit cards at ATMs jumped 235% to ₹2.85 lakh crore in March 2023 compared to ₹84,934 crore withdrawn during December 2016, according to a report by banking logistics services provider CMS Info Systems.

The CMS India Cash Vibrancy Report 2023 report says December 2016 recorded the lowest monthly ATM cash withdrawal using debit cards following the demonetisation of high-value currency notes in the previous month.

According to RBI data, cash withdrawal at ATMs stood at ₹2.86 lakh crore in March. Of this, ₹396 crore was withdrawn using credit cards and ₹1,411 crore was withdrawn using prepaid cards. For the fiscal year 2022-23, the value of ATM cash withdrawals stood at ₹33.04 lakh crore.

Following the demonetisation announcement on November 8, 2016, there was a sharp decline in currency in circulation (CIC) to GDP ratio at 8.68% in FY17, and subsequently, the CIC-to-GDP ratio has traversed in the 10.70% to 14.39% range between FY18 and FY23, the report says, adding that India's CIC-to-GDP ratio has averaged around 12.4%, higher than the 10-year average of 11.8%.

"After demonetisation, CIC had witnessed a monthly decline of 33.14% from ₹17.78 lakh crore in October 2016 to ₹11.88 lakh crore in November 2016. In the post-demonetisation era, the lowest CIC was recorded at ₹9.43 lakh crore in December 2016, and ₹33.80 lakh crore in March 2023, an increase of over 3.58 times, or 258.39% on an absolute basis in a matter of 76 months," it says.

At $421 billion in 2021, India saw the third-highest annual growth of 7.9% in currency in circulation, while the U.K. (11.8%) and China (10.2%) respectively saw the highest and second-highest annual growth over 2020, says the report.

The report illustrates the strong demand for cash-based transactions in India — from ATM cash withdrawal patterns across metropolitan, semi- metropolitan, semi-urban, and rural centres to sector-level analysis of business activity through retail cash management data.

"The report demonstrates the relevance and importance of cash in the Indian economy. It is critical to widen financial inclusion and provide a convenient and low-cost payment system which is accessible to everyone in the society. We have seen 10.1% growth in monthly average cash replenishment at ATMs and a strong 1.3X increase in average cash collection per point with e-commerce companies in FY23," says Anush Raghavan, president, Cash Management Services, CMS Info Systems.

"It is noteworthy that a significant portion of the population in India is unbanked, with no access to formal banking services. These individuals rely on cash usage every day as their primary means of conducting transactions. Under penetration of financial and digital literacy further leads to security concerns for digital payments despite the convenience offered. The correct balance of cash and digital will lead a booming economy like ours to an upward trajectory, is our belief," Raghavan adds.