RBI Reports Cash Paradox as Currency Circulation Grows

Reserve Bank of India Deputy Governor Shirish Chandra Murmu identified a cash paradox in the Indian economy where physical currency in circulation continues to grow at double-digit rates despite a surge in digital payment adoption. Speaking at a Bank Indonesia seminar in Jakarta on August 13, Murmu noted that while cash's share of individual transactions is declining, the total volume of currency in circulation rose nearly 12 percent to Rs 41.6 lakh crore by the end of FY26.

This trend complicates the central bank's five-year forward projections for currency production and distribution. India currently maintains 176 billion banknotes in circulation, producing 28 to 30 billion and disposing of approximately 21 billion annually. Murmu stated that "cash remains a significant mode of payment in the Indian economy."

To manage this growth and reduce the carbon footprint of the cash cycle, the Reserve Bank of India is exploring methods to extend banknote lifespans. These initiatives include introducing polymer notes for lower denominations and applying surface coatings to existing currency. Murmu expressed a need for better modeling to understand the tension between digital growth and physical currency demand.