According to a recent economic research report by the State Bank of India (SBI) titled “Ecowrap,” an increase of ₹1 in the value of UPI (unified payments interface) transactions results in an 18 paisa decline in debit card transactions. This indicates that individuals now visit ATMs an average of 8 times per year, compared to the previous 16 visits. The report’s findings are based on monthly time series data analysis covering the period from April 2016 to April 2023.
SBI’s economic research department (ERD) discovered that cash withdrawals through debit cards at ATMs have decreased since November 2018, with UPI gaining prominence. Soumya Kanti Ghosh, the Group Chief Economic Adviser at SBI, emphasized that UPI has not only transformed India’s payment landscape but has also significantly altered the purpose for which currency is used, shifting from investment to speculation (trading).
The research conducted by ERD reveals that rural and semi-urban areas now account for 60% of the share in UPI value and volume, challenging the popular notion that digital payment adoption and innovation are primarily concentrated in metro/urban areas.
UPI has emerged as the most popular and preferred payment mode in India, driving Person to Person (P2P) as well as Person to Merchant (P2M) transactions, which account for approximately 73% of all digital payments, as stated in the Ecowrap report.
ERD’s analysis further indicates a substantial increase in the volume of UPI transactions, skyrocketing from 1.8 crore in FY17 to 8,375 crore in FY23. The value of UPI transactions has also experienced significant growth, surging from ₹6,947 crore to ₹139-lakh crore during the same period, marking a staggering jump of 2004 times.
Interestingly, ERD notes that the proportion of currency in circulation (CIC) relative to GDP in FY23 has moderated to 12.4%, nearly the same level as in 2015-16. Additionally, the yearly growth in CIC has declined to 7.9% in FY23 from 16.6% in FY21, according to the report.