UPI Is Booming Across India, Know- Why Is Demand For Cash Still Rising?
Mumbai: India’s digital payment revolution is gathering pace, with people scanning QR codes for tea and groceries to utility bills. Yet a surprising trend remains: cash circulating in the economy continues to rise. Reserve Bank of India data showed currency in circulation reached Rs 42.86 lakh crore by August-end, registering annual growth of 12.5 percent. Why is demand for banknotes rising when…
Mumbai: While India's digital payment scene is experiencing a surge, with QR code scanning becoming commonplace for everyday purchases, an intriguing parallel is emerging. Despite the surge in digital transactions, the volume of cash in circulation has been on the rise. According to data from the Reserve Bank of India, the total currency in circulation rose to Rs 42.86 lakh crore by the end of August, marking a 12.5 percent annual growth.
This has sparked questions about why cash demand is still increasing when UPI usage is breaking records.
The truth is, digital payments and cash are not in direct competition. Instead, consumers opt for one or the other based on factors such as convenience, location, and transaction size. According to RBI Deputy Governor Shirish Chandra Murmu, cash remains a favored mode of payment, especially among lower-income groups, the elderly, and small businesses. Factors like limited internet access, familiarity with banknotes, and the ease of small, informal transactions contribute to the demand for cash.
However, this does not mean people are abandoning UPI. In August, the number of UPI transactions increased by 22.5 percent compared to the previous year, while their overall value rose by nearly 20 percent. This indicates that India is witnessing a simultaneous rise in both digital payments and cash usage. The growth of India's digital economy, rising incomes, and increased consumer spending are driving this dual expansion of payment methods.
There are concerns that the Merchant Discount Rate (MDR) charges on certain UPI merchant payments above Rs 2,000 could push merchants towards cash transactions. However, this impact would depend on various factors, such as the specific transactions covered, the structure of the charges, and how merchants respond. As of now, India's payment landscape is not a straightforward battle between cash and UPI.
Instead, both digital transactions and cash are expanding and coexisting, catering to different users, situations, and spending needs.
Written by urgent.news from Free Press Journal's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
