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Digital Boom Yet Cash Hits Record High: SBI Report Reveals Why

Despite the rapid growth of digital payments like UPI, currency in circulation in India has reached a record high of approximately ₹40 lakh crore. The State Bank of India report attributes this surge to increased consumption fueled by lower interest rates and tax cuts, alongside the replacement of withdrawn ₹2000 denomination notes. The RBI has directed banks to increase the availability of lower denomination notes in ATMs to improve public convenience. The analysis concludes that both digital and cash systems continue to play vital roles in the economy, driven by robust financial activity.

Key Points: Cash Circulation Hits Record High Despite Digital Payments Surge

  • Currency circulation hits ₹40 lakh crore
  • Driven by high consumption & low interest rates
  • ₹2000 note withdrawal increases note count
  • UPI growth coexists with strong cash demand
  • RBI mandates more ₹100 & ₹200 notes in ATMs
3 min read

Despite surge in digital payments, paper money circulation at record level due to high consumption across rural & urban areas: SBI Report

SBI report shows currency in circulation at ₹40 lakh crore due to high consumption, low interest rates, and replacement of ₹2000 notes.

"higher demand for cash is linked to increased consumption across both rural and urban areas - SBI Report"

New Delhi, February 16

Cash use in India remains strong and currency in circulation has reached a record high despite the rapid rise in digital payments, mainly due to higher consumption, lower interest rates, and the replacement of Rs 2000 notes, according to a report by State Bank of India.

The report said currency in circulation (CiC) touched a record level of around Rs 40 lakh crore for the month ended January 2026, registering a year-on-year growth of 11.1 per cent, compared to 5.3 per cent growth in the same period last year.

On an incremental basis, CiC increased by Rs 2.76 lakh crore so far this year, compared to Rs 88,517 crore in the same period last year, showing a significant rise.

According to the report, higher demand for cash is linked to increased consumption across both rural and urban areas. Lower interest rates have encouraged people, especially in rural areas, to spend more cash. At the same time, direct and indirect tax cuts have boosted consumption in urban areas, which has also contributed to higher demand for currency.

The report noted that while digital payments through UPI have grown rapidly and are substituting cash in many transactions, overall demand for money continues to increase due to rising economic activity.

It confirmed that there is an inverse relationship between UPI transaction value and demand for cash, meaning higher digital payments reduce cash usage in some areas, but overall consumption growth is keeping currency demand high.

Another major reason behind the rise in currency circulation is the withdrawal of Rs 2000 denomination banknotes.

These high-value notes have been replaced by lower denomination notes such as Rs 100, Rs 200, and Rs 500, increasing the number of notes in circulation.

India's currency system continues to be dominated by paper notes, which account for 98.99 per cent of total currency value, while coins account for 0.98 per cent and the digital rupee (e₹) accounts for only 0.03 per cent.

To improve public convenience, the Reserve Bank of India (RBI) directed banks on April 28, 2025, to increase the availability of Rs 100 and Rs 200 notes in ATMs.

The RBI has also instructed that 96 per cent of ATMs should dispense Rs 100 and Rs 200 notes by March 2026, which is expected to further increase the supply of these notes.

The report also noted that gold imports are currently at their highest level since FY13. However, unlike earlier years when cash was used heavily to buy gold, this time people are selling gold and silver holdings to support household consumption, reflecting stronger financial activity.

The SBI report highlighted that while digital payments are growing rapidly, currency in circulation and ATM withdrawals are also rising due to higher consumption and note replacement, showing that both cash and digital payment systems continue to play an important role in the economy.

- ANI

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Reader Comments

R
Rohit P
Interesting report. It shows India is growing in a balanced way. Digital for convenience, cash for trust and widespread use. The fact that people are selling gold to support consumption instead of hoarding cash is a very positive sign of financial maturity. Jai Hind! 🇮🇳
A
Aman W
While the growth is good, we must be cautious. 40 lakh crore in circulation is a huge number. Hope this doesn't lead to inflationary pressures down the line. The RBI needs to manage this growth carefully alongside digital rupee promotion.
S
Sarah B
As someone who moved to Bangalore for work, I see both worlds. My office canteen and Uber are all UPI. But when I visit the local market or take an auto, cash is king. The economy is booming, and both systems are thriving. More ATMs with 100 rupee notes will be a big help!
V
Vikram M
The rural consumption story is key. Lower interest rates mean farmers and small business owners have more money to spend on goods, weddings, and festivals. This cash circulates in the local economy and creates jobs. Digital is the future, but cash is the present reality for millions.
K
Karthik V
I have a respectful criticism. The report highlights growth, but what about the cost? Printing and managing this much physical currency must be enormous. Shouldn't there be a more aggressive push for digital in rural areas through better internet and literacy campaigns? We can't rely on cash forever.

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