Record Surge: Cash in Circulation Increases by 11% to Rs 40 Lakh Crore
Currency in circulation (CiC) in India has reached an unprecedented Rs 40 lakh crore as of January, marking an 11.1% increase compared to the previous year. Despite this surge, the cash-to-GDP ratio has significantly decreased, now standing at approximately 11.2%, down from a pandemic peak of 14.4% in March 2021. This shift indicates a growing reliance on digital payments, even as the absolute amount of cash in circulation continues to rise.
Trends in Currency Circulation
Over the past decade, currency holdings in India have shown a steady upward trajectory. In March 2013, CiC was recorded at Rs 11.8 lakh crore, representing 12% of GDP. This figure increased to Rs 16.6 lakh crore by March 2016. However, following the demonetisation initiative, CiC dropped to Rs 13.4 lakh crore in March 2017. The pandemic prompted a significant increase, with cash holdings soaring to Rs 28.5 lakh crore by March 2021, which constituted 14.4% of GDP. Since then, while the absolute cash amount has continued to grow, the CiC-GDP ratio has gradually declined, stabilizing around 11-11.2% by January 2026.
Factors Influencing Cash Holdings
A recent report by the State Bank of India attributes the record level of cash stock to several factors, including stringent tax enforcement, low interest rates, and changing household behaviors. For instance, approximately 18,000 GST notices were issued in July 2025 to small vendors based on their UPI transaction volumes, which coincided with increased ATM withdrawals in states like Karnataka, West Bengal, and Kerala. This suggests a trend of small traders reverting to cash transactions. Additionally, weak deposit growth and lower interest rates have prompted households to maintain higher cash reserves, while some have sold gold and silver to enhance liquidity, further contributing to increased cash holdings.
Growth of Digital Payments
Despite the rise in cash holdings, digital payment methods are expanding at a remarkable pace. Data from the National Payments Corporation of India reveals that UPI transactions now account for approximately 70-80% of all digital payments. Monthly UPI transactions surged from around 140 crore in March 2020 to over 200 crore by October 2020, and further to 355 crore by August 2021, with a total value of Rs 6.4 lakh crore. December 2025 saw record levels with 2,163 crore transactions valued at nearly Rs 28 lakh crore, followed by 2,170 crore transactions in January 2026, averaging about 70 crore transactions daily.
Shifts in Currency Denominations
Recent trends in currency denominations highlight the evolving role of cash as a store of value. The share of the Rs 500 note in total currency value increased by 4.4% between April 2025 and January 2026. Following the withdrawal of the Rs 2,000 note, medium denominations have gained prominence, while small-value notes have diminished in relevance. The volume share of notes below Rs 20 decreased from 36.5% in 2023 to 32.4% in 2025, with their value share also slightly declining from 1.7% to 1.6%. This broad trend indicates a structural shift: while cash holdings are increasing in absolute terms, the declining cash-to-GDP ratio and the rapid adoption of digital payment systems suggest that physical currency is increasingly being retained for storage, with digital platforms managing a growing portion of everyday transactions.
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