The Reserve Bank of India is increasingly unable to forecast currency note demand as digital payment adoption accelerates, with cash still expanding as a store of value while usage for daily transactions declines, indicating a complex shift in payment habits.
The Reserve Bank of India is finding it harder to forecast demand for currency notes as digital payments become more entrenched, even though cash in circulation is still rising at double-digit rates, deputy governor SC Murmu said.
Speaking at a central bankers’ meeting in Jakarta on August 13, Murmu said the shift has made planning more difficult for the central bank because cash is losing share in everyday transactions while still expanding as a stock of money held by the public.
Recent Reserve Bank research points in the same direction. One paper, reported by Moneycontrol, said cash use for transactions is falling even as demand for cash persists for precautionary reasons and as a store of value. That suggests people are relying less on notes and coins for routine spending, but still keeping cash for safety and convenience.
A separate Reserve Bank study, reported by Business Standard, found that wider adoption of the Unified Payments Interface is associated with lower cash demand, both nationally and in regions where digital payments are more widely used. Another Business Standard report also noted that public demand for cash was already weakening before the 2016 demonetisation, indicating the trend predates the policy shock. The Reserve Bank has also warned that the growth of digital payments brings new priorities, including cybersecurity and customer protection, if the momentum is to continue.
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