Cash is King


India is a largely cash dependent economy. Even after extensive drive for digitization of transaction, cash still remains the go to option for many individuals. Cash transactions have yet again come on par with the pre-demonetisation levels. Though there is huge progress in the number of digital transactions, there is still a long way to go. Here is why cash is king for most individuals.

1) Habit

Indians for long have been accustomed to cash transaction for daily spends and it is only in the last couple of years that digital transactions have started to gain pace. Thus cash is the default choice of payment. Besides, many people, especially from the older generation find it difficult to operate digital transactions.

2) Liquidity

Cash is the most liquid asset, meaning you can immediately spend it. Payment or receipt in the form of cash is easily and quickly processed. It can be used almost everywhere and by anyone. It also gives advantage when you have to make down payment for big purchases like car or property. Other assets which are not a liquid cannot be used anytime as per our convenience. You might also have to wait for the right time to sell those assets, which is not the case with cash.

3) Risk

Hacking is a big risk which deters digital transaction. One hears lot of stories of hacking, phishing, identity theft, etc. It therefore makes sense to have certain savings which are away from the risk of online threats. Cash is a safe and secure way of transacting.

4) Contingency

Everyone needs to have few months of salary saved for emergencies, preferably in the form of cash. This can be for emergencies not covered by insurance such as legal issues. Having cash on hand helps you to deal with such unexpected expenses without having to take high interest debt.

5) Cost

Cash transactions do not have any charges or fees for processing them. It can prevent you from taking debt which normally have high interest rates. If you pay using credit card, you will have to pay high interest for delay or default in payment. There may also be charges levied for using credit card. It is seen that those who use cash instead of credit card are likely to spend less as they can witness their cash vanishing away and start be careful about their spends.

6) Cash-only transaction

There are lots of businesses which only accept payment in the form of cash. These include public transport, small shops, hawkers, etc. Carrying cash in this case will be easier for both customers and sellers.

Cash forms an important part of our daily life and it is unlikely that our dependence on it will reduce any time soon.

Rohit Grover
Rohit is a senior certified financial planner at He is part of Moneyfrog’s research team and keeps track on the fund movement & the market.
He is an expert with numbers. Formulas & analytics.

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