'India will take time to hit global levels of less-cash economy'

New Delhi: The demonetisation phase has certainly given a fillip to electronic payments in India, but it will take time to reach global standards of a 'less-cash' economy, says a report.

After the initial surge in volume of electronic payments in November-December, the trend seems to be normalising in January and February as currency in circulation in the system is slowly increasing, according to Kotak Institutional Equities.

"The demonetisation phase has certainly given a fillip to electronic payments especially at the lower-end of the value spectrum. We believe this is a good start but it will take time to reach global standards of a 'less-cash' economy," Kotak Institutional Equities said in a research note.

Citing examples, the report said that low cash/GDP economies such as UK and Sweden have taken decades for the transition and India is expected to achieve this in a relatively short span of time provided some necessary steps are taken.

"India's transition is likely to be faster than the current less-cash economies given existing technological advancements which, if proactively supported, could help in faster transitions," the report said.

A global comparison based on transaction levels and infrastructure shows that India's transactions' value levels are comparable to other major countries, but the country performs fairly well amongst its peers in terms of value per transaction.

"This is symptomatic of a still low penetration level of banking and other financial channels, especially in the rural segment. Even if brick-and-mortar channels are not expanded, there has to be expansion and investment in the digital infrastructure to reach any meaningful global comparison," the report said.

Moreover, card-based transactions will also need more investment as POS terminals are woefully short in India compared to other countries where digital payments are at a relatively advanced level, it added.