RBI: Central bank focusing on bringing down cash component in economy

RBI has said that the central bank is focused on bringing down the cash component in the economy. Speaking to reporters in Mumbai today, RBI Deputy Governor H R Khan said that circulation of a large amount of cash in the economy leads to many problems and hence India should move towards a less cash society. 

He added that a lower cash component will help in reducing problems of rampant corruption, monetary policy transmission issues and cash management for banks at the operational level. Mr. Khan informed that currently, the amount of cash circulating in the system is up to 14 per cent of GDP. He said that implementation of information and communication technology solutions like mobile and online banking, core banking and electronic fund transfers can help bring down the reliance on cash.

Meanwhile, Mr. Khan has asked cooperative banks to pull up their socks, noting that the sector has not grown as much as the RBI would have wanted it to grow. 

On a separate note, RBI has issued a notification allowing banks to use the services of SME Rating Agency of India for risk weighting loans. Currently, five rating agencies CARE, CRISIL, FITCH India, ICRA and Brickwork are authorized by the RBI to provide risk weight to loans and for capital adequacy purposes.