Almost 96% of transactions in India are conducted in cash and only 3.6% of Indian households use cashless transactions, according to a report.

The report, by India Development Fund and Internet and Mobile Association of India and sponsored by Visa and ItzCash, blamed poor acceptance of cards by merchants and lack of awareness of alternate payment options.

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It said: "Penetration of cashless transaction stands at measly 0.43%. It has been seen that only about 3.6% of the households in India make cashless transactions."

Although about 11% of urban households do make cashless transactions, the average was dragged down by poor penetration in rural areas.

The government and Reserve Bank of India has been asking banks to promote cashless transactions to reduce the use of expensive payment methods like cash and cheque.

The report said: "With over INR1tr ($15bn) of cash in circulation, a transformation of 1 % moving to cashless transactions can reduce cash circulation by INR1bn."

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The cost of printing and maintaining the amount of currency in circulation in India is estimated to be about one fifth of the country’s GDP.

Uttam Naik, country manager for Visa, said: "It is imperative that we highlight the savings which the Indian economy can achieve by replacing costly paper cheques, vouchers and cash transactions with safer, streamlined and more transparent electronic payments.

"In the current challenging economic situation, increasing the adoption of electronic payment gives the unbanked and under-banked more financial services and options to create efficiencies, contribute to GDP growth and job creation."

 

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