SYDNEY, Nov. 14 (Xinhua) -- Australia should follow in India's footsteps and remove large denominated currency from circulation to improve the economy and banking resilience, analysts at UBS Group AG said in a note to clients on Monday.
India last week removed 1,000 rupee and 500 rupee banks notes from circulation in a bid to clamp down on corruption and curb the use of fake money in one of the world's largest cash economies.
UBS says Australia should take the same approach despite concerns with the cash economy not being the same as in India.
"Given the increasing level of digital transaction penetration we believe Australia could move to remove larger denomination notes," the analysts, led by Jonathon Mott, said, adding it "would be good for the economy and good for the banks."
In Australia, 92 percent of all currency by value is in the two largest denominations, the 50 Australian dollar and 100 Australian dollar note. The larger that's "rarely seen" has almost three times as many notes as Australia's five Australian dollar note (by number) in circulation.
However, Reserve Bank of Australia (RBA) data shows Automatic Teller Machine (ATM) transactions have fallen 3.4 percent per annum since 2009, while credit card transactions have grown at 7.3 percent per annum driven by contactless payments, according to the UBS note.
The benefits include reducing crime, increased tax revenue and reduced welfare fraud, while banks would likely see a spike in deposits by approximately four percent, reducing the reliance on offshore funding sources.