Just 3.6 per cent households in the country undertake cashless transactions, although the government and the Reserve Bank of India (RBI) have been taking steps to promote e-payment channels, says a report.
It cited poor acceptance of cards by sellers and lack of awareness about cashless systems/options as the two main reasons for such low penetration.
"Penetration of cashless transaction stands at measly 0.43 per cent. It has been seen that only about 3.6 per cent of the households in India make cashless transactions," said a report by India Development Fund and Internet and Mobile Association of India that was sponsored by Visa and ItzCash.
About 11 per cent households in urban areas undertake cashless transactions, while in rural India, only 0.43 per cent of the households make cashless transactions.
The survey for the report covered 3,066 households.
The government has been asking banks to encourage transactions through e-payment channels so as to reduce the number of transactions through cheques and other expensive modes of transactions.
"With over Rs 1 trillion of cash in circulation, a transformation of 1 per cent moving to cashless transactions can reduce cash circulation by Rs 1 billion," the report said.
As almost 96 per cent of all transactions in the country are conducted in cash, the repercussions are felt by individuals, businesses and the government, it added.
"In 2009-10, RBI incurred an annual cost of Rs 2,800 crore to just print the currency notes, which was 0.4 per cent of the total currency in circulation. This cost, however, does not include the cost of storage, transportation, security, detection of counterfeits, etc," the report said.
The cost of printing and maintaining this extensive amount of cash costs the country about 0.2 of its GDP, it estimated.
"In the current challenging economic situation, increasing the adoption of electronic payment gives the unbanked and under-banked more financial services and options to create efficiencies, contribute to GDP growth and job creation," Visa Group Country Manager for India and South Asia Uttam Naik said.