Currency in circulation (CiC) in India has climbed to an all-time high of about ₹40 lakh crore as of the fortnight ended 31 January 2026, even as digital payments through unified payment interface (UPI) continue to scale record levels. What makes the development noteworthy is that the increase in physical currency is taking place alongside unprecedented growth in digital payments, says a report from the State Bank of India (SBI).
It says, "Despite the absolute rise in currency, the cash-to-gross domestic product (GDP) ratio has declined steadily over the past few years. It has fallen to 11% in FY25-26 from 14.4% in FY20-21. Automatic teller machine (ATM) withdrawals as a percentage of GDP have also moderated. This suggests that economic growth is being financed less by incremental cash usage and more through digital transactions."
The latest data from the Reserve Bank of India (RBI) shows that CiC registered a year-on-year (y-o-y) growth of 11.1%, sharply higher than the 5.3% growth recorded in the corresponding period last year. On a year-to-date basis (April 2025 to January 2026), currency expanded by ₹2.76 lakh crore, more than three times the increase seen during the same period in the previous financial year.
Currency with the public, which accounts for nearly 98% of total currency in circulation, also reached an all-time high of about ₹39 lakh crore, growing 11.5% y-o-y. If the current pace continues, the incremental rise in currency this year could surpass the surge witnessed during the immediate post-pandemic period, SBI says.
UPI transactions in value terms touched ₹28.3 lakh crore in a single month which is equivalent to nearly 70% of the total currency stock in the economy. The scale of digital adoption indicates that India’s payment ecosystem is increasingly dual-track — with cash and digital coexisting rather than replacing each other outright.
Econometric analysis by SBI indicates that while money demand moves in the same direction as GDP growth, the statistical relationship weakens once UPI transaction values are factored in. Digital transactions show a strong inverse relationship with money demand, confirming that UPI is substituting certain layers of cash usage.
According to the report, lower interest rates appear to have played a role in supporting higher cash demand, particularly in rural areas where precautionary holdings and consumption patterns remain significant. "Deposit growth has been relatively moderate this year, which may also be contributing to higher cash balances in circulation."
ATM withdrawals remain elevated at around ₹2.5 lakh crore per month on average. State-level data suggest increasing withdrawal trends in Karnataka, West Bengal, Tamil Nadu, Chhattisgarh, Punjab and Jharkhand.
An intensity-based analysis examining ATM withdrawal behaviour after goods and services tax (GST) notices were reportedly issued to small traders in Karnataka in July 2025 indicates that districts with higher pre-existing ATM activity saw additional increases in monthly withdrawals compared with other districts. Similar patterns were observed in parts of West Bengal and Kerala. The findings suggest that compliance-related concerns may have temporarily nudged some small merchants and consumers toward greater cash usage, SBI says.
Another factor behind rising currency is the surge in precious metal prices. The report says that higher gold and silver prices may have led households to monetise part of their holdings, injecting liquidity into the system. "Gold imports have risen to their highest levels since FY12-13, while silver imports have also recorded strong growth. Unlike the earlier phase a decade ago when high gold imports were associated with large cash purchases, the current phase reflects households cashing out holdings to support consumption."
Changes in the currency denomination mix have also influenced overall circulation patterns. Following the withdrawal of ₹2,000 notes announced on 19 May 2023 by RBI, the share of ₹500 notes has risen sharply. By March 2025, ₹500 notes accounted for 86% of the total value of banknotes in circulation. Currency chest data indicate that this share has risen further during the current financial year.
At the same time, the report says smaller denominations such as ₹50, ₹100 and ₹200 have seen adjustments aligned with digital substitution trends. UPI transactions are predominantly small-ticket in nature — about 86% of person-to-merchant transactions by volume are below ₹500. This suggests that digital payments are primarily competing with lower-denomination notes rather than large-value currency.
RBI has directed banks to ensure that 96% of ATMs dispense ₹100 and ₹200 notes by March-end 2026 to enhance convenience and address public demand for smaller denominations.
The overall picture points to a structural evolution in money demand rather than a reversal of digitalisation, the report says. "Currency growth appears to be tracking nominal economic expansion, seasonal demand and denomination adjustments, even as digital platforms handle an increasing share of day-to-day retail transactions."
India is witnessing a unique coexistence: record-high currency in circulation alongside record-high digital payments. The declining cash-to-GDP ratio indicates deepening formalisation and digital integration, even though absolute currency levels continue to rise in line with economic growth.
The key policy takeaway, according to SBI, is that digital payment systems must continue to be supported. Any signal that discourages digital adoption could slow formalisation gains and alter behavioural patterns in favour of cash.
For now, cash and digital payments are expanding and serving different transactional layers of a rapidly growing economy.
