Cash in circulation rises 11% to record Rs 40 lakh crore

MUMBAI: Currency in circulation (CiC) touched a record Rs 40 lakh crore in Jan, rising 11.1% year-on-year, even as its share in the economy declined. The cash-to-GDP ratio eased to around 11.2%, down sharply from the pandemic peak of 14.4% in March 2021, signalling digital payments are financing a growing share of economic activity despite higher absolute cash holdings.

In absolute terms, currency holdings have expanded steadily over the past decade. CiC rose from Rs 11.8 lakh crore in March 2013 (12% of GDP) to Rs 16.6 lakh crore in March 2016. Following demonetisation, it fell to Rs 13.4 lakh crore in March 2017 but surged to Rs 28.5 lakh crore in the pandemic-era dash-to-cash by March 2021 (14.4%). While the absolute amount of cash continued to rise, the CiC-GDP ratio moderated to 13.7% in March 2022, 12.4% in March 2023, 11.9% in March 2024 and 11.26% in March 2025, before stabilising around 11-11.2% by Jan 2026.

A report by State Bank of India attributed the record cash stock to tax enforcement, low interest rates and shifting household behaviour. Around 18,000 GST notices issued in July 2025 to small vendors based on UPI transaction volumes coincided with spikes in ATM withdrawals in Karnataka, West Bengal and Kerala, indicating a shift back to cash among small traders. Weak deposit growth and lower interest rates have also encouraged precautionary cash savings, while households selling gold and silver to raise liquidity have supported cash holdings and consumption.

Digital payments, however, continue to expand rapidly. Data from National Payments Corporation of India show UPI now accounts for about 70-80% of digital payments. Monthly UPI transactions rose from around 140 crore in March 2020 to over 200 crore by Oct 2020 and 355 crore by Aug 2021, valued at Rs 6.4 lakh crore. Record levels were reached in Dec 2025 with 2,163 crore transactions worth nearly Rs 28 lakh crore, followed by 2,170 crore transactions in Jan 2026 - roughly 70 crore transactions a day.

Currency denomination trends reinforce the store-of-value role of cash. The Rs 500 note's share in total currency value rose by 4.4% between April 2025 and Jan 2026. After the withdrawal of the Rs 2,000 note, medium denominations gained ground. Small-value notes continued to lose relevance, with the volume share of notes below Rs 20 declining from 36.5% in 2023 to 32.4% in 2025 and their value share edging down from 1.7% to 1.6%.

The broad trend suggests a structural shift: more cash is being held in absolute terms, but a declining cash-to-GDP ratio alongside rapid UPI adoption indicates physical currency is increasingly retained for storage, while digital systems handle a rising share of everyday transactions.