In a remarkable development, for the first time in 20 years, currency in circulation declined during the Diwali week, a SBI Ecowrap research report said on Thursday (3 November).

Innovations in technology has changed the Indian payment system and over the years, the Indian cash lead economy now has changed to smart-phone lead payment economy, the report stated.

The report added that a lower currency in circulation also is akin to a CRR cut for the banking system, as it results in less leakage of deposits and it will impact monetary transmission positively.

"The success of the digital journey is primarily due to the relentless push by the Government to formalize and digitalize the economy. Further, the interoperable payments systems like UPI, Wallets & PPIs have made it simple and cheaper to transfer money digitally, even for those who don’t have bank accounts," said the report authored by SBI's chief economic adviser Soumya Kanti Ghosh.

"Over the years, the system has expanded rapidly with new innovations like QR code, NFC etc and has also seen the swift entry of big tech firms in this industry," the report said.

According to the report, the rise in digital payments is a win-win for both RBI and the government, as it results in saving of seignorage costs and also a less cash economy.