Cash Remains King: Influx in Currency Circulation Despite Digital Payment Rise in India

Despite the surge in digital payments in India, cash circulation hits a record high, driven by consumption rise, low interest rates, and Rs 2000 note replacements, SBI reports. While digital transactions grow, higher cash demand due to economic expansion and diverse factors sustains traditional currency usage.

A report by the State Bank of India reveals that despite the rapid increase in digital payments, cash usage in India remains robust, with currency in circulation reaching an unprecedented level. The circulation hit approximately Rs 40 lakh crore by the end of January 2026, marking an 11.1% year-on-year increase.

This surge, significantly higher than the previous year's 5.3% growth, is attributed to enhanced consumption both in rural and urban areas, facilitated by lower interest rates. Consumers, particularly in rural locales, are more inclined to spend cash, complementing increased urban consumption driven by tax reductions.

Interestingly, the report notes that while digital payments via UPI have grown, satisfying various transaction needs, overall cash demand simultaneously swells due to economic activities. Notably, the phasing out of Rs 2000 notes has led to more lower denomination notes in circulation, contributing significantly to this trend.

(With inputs from agencies.)