Digital Payments Rise, But Cash Demand Remains Strong In India: RBI Deputy Governor

Mumbai, August 18: Despite a surge in digital payments across India over the past decade, the supply of cash in circulation has not diminished, particularly in rural and semi-urban regions, among low-income individuals, elderly populations, and small enterprises, stated Reserve Bank of India (RBI) Deputy Governor Shirish Chandra Murmu.

Cash demand remains robust, with currency in circulation expanding at double-digit rates, even as cash's share of individual transactions is dwindling due to the increasing adoption of digital payments. This situation presents challenges for the central bank in planning production and distribution capacity, as predicting future demand becomes more difficult.

Cash continues to play a significant role in the Indian economy, and safeguarding trust in it, through the use of clean notes, secure logistics, and a reliable currency ecosystem, is crucial for maintaining monetary sovereignty, Murmu remarked during a speech at an event organized by Bank Indonesia in Jakarta on August 13. The RBI has been producing between 28 and 30 billion banknotes annually in six denominations and disposing of approximately 21 billion notes per year.

Presently, 176 billion banknotes are in circulation in India. In comparison, around 56 billion US dollar bills and 30 billion euro banknotes were in circulation at the end of last year. However, it is worth noting that our count is influenced by a higher proportion of lower-value notes, which results in more pieces being in circulation for the same value of transactions.

Nonetheless, this volume offers an indication of the scale of logistical management the central bank has to handle daily. To enhance the durability of currency, the RBI is investigating methods to extend the lifespan of banknotes, such as applying surface coatings and introducing polymer notes for lower denominations. Additionally, the regulator is striving to minimize the environmental impact of the cash cycle by optimizing the distribution network for efficiency and improving the management of banknote briquettes.