This marks the fastest growth since FY21, even as digital payments continue to dominate everyday transactions. The Reserve Bank of India (RBI) has simultaneously moved to ease pressure on the rupee by asking state-run oil refiners to reduce spot dollar purchases and instead rely on special credit lines through the State Bank of India.
The surge in cash circulation reflects a complex mix of factors. Rural demand has revived strongly after two consecutive good monsoons, boosting liquidity needs in informal markets where cash remains the preferred medium.
A recent Nabard survey highlighted rising rural incomes and household well-being, reinforcing the role of cash in rural consumption. At the same time, enforcement actions such as the issuance of 18,000 GST notices in 2025 for UPI-linked transactions have nudged small traders back toward cash. Weak deposit growth, low interest rates, and households liquidating gold and silver to raise funds have also contributed to higher cash holdings.
Yet, the broader picture shows cash losing ground in relative terms. The cash-to-GDP ratio has fallen to around 11.2% from 14.4% in FY21, highlighting the rapid expansion of digital payments. Unified Payments Interface (UPI) transactions grew 21% in value to INR 314 trillion in FY26, with volumes up 30% to 241 billion. UPI now accounts for the bulk of digital transactions, handling nearly 70 crore transactions daily. This duality, cash as a store of value and digital platforms as the medium for everyday transactions, has become a defining feature of India’s financial ecosystem.
The RBI’s currency management strategy is also evolving. Beyond curbing refiners’ dollar demand, the central bank has tightened rules around arbitrage trades between onshore and offshore markets and restricted speculative activity by corporates. These measures are aimed at stabilising the rupee, which had recently settled at 93.19 against the dollar but is expected to open stronger.
This record rise in cash circulation signals continued demand for secure printing of banknotes and related financial instruments, even as digital adoption accelerates. India’s economy is thus navigating a paradox: cash circulation is at historic highs, but its relative importance is shrinking as digital payments reshape transaction behaviour.
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