Large cash market main driver of corruption: RBI

Stating that the circulation of a large amount of cash in the economy leads to many problems, including corruption, Reserve Bank Deputy Governor H R Khan today said the central bank is focused on bringing down the cash component in the economy.

"We want that we should move towards a less cash society. There is a need for the predominant cash in the society to go down," Khan told reporters at the sidelines of a Punjab & Maharashtra Cooperative (PMC) Bank event here.

He said if the cash component in the society goes down, it will help solve a lot of problems like the rampant corruption, monetary policy transmission issues and cash management for banks at the operational level.

At present, the amount of cash circulating in the system is up to 14 percent of the GDP, which makes the country one of the highest markets that has cash circulation, he said, stressing on the need to bring down the ratio.

Only Japan has such high levels of cash, he said, without giving a target on the ratio.

The remarks come at a time when there is a widespread angst in the society over rampant corruption, with repeated reports from the statutory auditor on alleged corruption only doubting the credibility of the government.

Khan said implementation of information and communication technology (ICT) solutions like mobile and online banking, core banking and electronic fund transfers can help bring down the reliance on cash.

Both the government and the RBI are taking efforts to bring down usage of cash, Khan said, citing the case of compulsory use of electronic fund transfers for all transactions above Rs 25,000 adopted by the government.