E-Payment System reforms and its impact on Currency in Circulation in India: Evaluation using Vector Autoregressive Model (VAR)

Abstract

The present study contributes to the literature by investigating the impact of E-Payment System on Currency in circulation after facing three major reforms i.e., Demonetization of 500 and 1000 rupee note, implementation of GST and Current pandemic (Covid-19) situation. Results imply that with the increase in the volume of all the respective electronic payment systems the currency in circulation (in physical form) got minimized in the economy. Moreover, NEFT shows much higher influence on currency in circulation as compare to RTGS and IMPS but PPI’s shows the highest influence on currency in circulation from the selected E-Payment systems. Furthermore, Vector Autoregressive model suggests, RTGS, IMPS, NEFT, CARDS (POS), PPI’s, M-Banking are expected to increase whereas NACH is expected to observe a downfall in the near future.