Mumbai: With a new motto of 'cash is king, but digital is divine', the Reserve Bank of India (RBI) on Monday said its aim is to ensure that digital payments are a divine experience for Indians.

In a new assessment of how well the process of digitisation has taken place, the RBI said while there is no accurate measure of cash payments in the country, the progress of various digital payments can be measured accurately.

Overall, digital payments in the country have witnessed a growth (CAGR) of 61% and 19%  in terms of volume and value, respectively over the past five years, demonstrating a steep shift towards digital payments.

"Cash still rules but is increasingly seen as a way to store value as an economic asset rather than to make payments," it said.

It further said the notes-in-circulation (NIC) increased at an average rate of 14%  between October 2014 and October 2016. Assuming the same growth rate, NIC would have been Rs 26,04,953 crore in October 2019.

"NIC, however, was Rs 22,31,090 crore, indicating that digitisation and reduction in cash usage helped reduce NIC by over Rs 3.5 lakh crore," the central bank said.

'Notes in circulation' is defined as 'currency in circulation (CIC)' minus coins in circulation.

The study further said that it is assumed that having high CIC relative to GDP indicates that cash is highly preferred as a payment instrument.

Based on this assumption, India continues to have a strong bias for cash payments.

Demonetisation and an active growth in GDP brought down the cash in circulation as a percentage of GDP to 8.7% in 2016-17, the assessment said.

"This increased to 10.70% in 2017-18 and to 11.2% in 2018-19 which, however, is less than the pre-demonetisation level of 12.1% in 2015-16. The rate of increase is lower indicating a perceptible shift away from cash," it said.

The RBI said a large population of the country historically lacked access to personal bank accounts and access to formal credit. Digital payment methods have played a large role in helping them manage their personal finances leading to their being financially included.

"Speed, convenience and competition are shaping the future of payments. Our endeavour is to make digital (payments) a divine experience to the users - Cash is King, but Digital is Divine," the study said.

India's growing use of retail digital payments, along with the radical reconstruction of its cash economy, indicates a shift in its relationship with cash.

This is evidenced by the steep growth observed in retail digital payments.

"Increasing acceptance and convenience of digital payments vis-a-vis cash is also reflected in the decrease in average value per digital payment transaction," the RBI said.

The government had demonetised the prevailing high value denomination notes of Rs 500 and Rs 1000 in November 2016 with an aim to check black money and move towards less cash economy.

(With inputs from PTI)

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