India faces cash paradox as physical currency grows despite digital surge

India is experiencing a “cash paradox” where the volume of physical currency in circulation continues to grow at double-digit rates despite the rapid surge in digital payment adoption through the Unified Payments Interface (UPI).

The Reserve Bank of India (RBI) currently has 176 billion banknotes in circulation. To manage this, the central bank prints between 28 and 30 billion new notes across six denominations annually while retiring approximately 21 billion notes. This creates significant logistical challenges for production and distribution.

RBI Deputy Governor Shirish Chandra Murmu noted that the combination of rising digital transactions and increasing physical cash holdings makes future demand difficult to predict. Currency in circulation includes all physical banknotes and coins held by the public and businesses, whether they are actively being spent or simply held as savings.