Despite record-breaking growth in digital transactions, India’s reserve currency in circulation continues to expand, highlighting the ongoing coexistence of cash and digital payments in the country’s diverse economy.
India’s cash economy is still expanding even as digital payments set fresh records. Reserve Bank of India data cited by the Free Press Journal show currency in circulation climbed to Rs 42.86 lakh crore by the end of August, up 12.5 per cent from a year earlier, at the same time as UPI usage kept rising sharply. That points to a payments landscape in which banknotes and instant transfers are growing together rather than replacing one another.
According to the Free Press Journal, the RBI’s deputy governor, Shirish Chandra Murmu, said cash remains important for lower-income households, older people and small businesses, especially where internet access is patchy or transactions are small and informal. The report also notes that UPI transactions rose 22.5 per cent in August from a year earlier, while the value of those payments increased by nearly 20 per cent, underscoring the scale of digital adoption.
That growth fits a broader trend identified by the National Payments Corporation of India and reported by the Times of India and other outlets in August 2023, when UPI transactions crossed 10 billion in a single month. Those reports said the system was being driven increasingly by person-to-merchant payments, showing how widely it had spread beyond peer-to-peer transfers into everyday purchases and bill payments.
The latest debate over merchant discount rate charges on some UPI payments above Rs 2,000 may also be adding to the discussion around cash demand, the Free Press Journal said. Any such cost would fall on merchants rather than customers directly, but some businesses could still favour cash for larger transactions if fees are introduced. For now, the evidence suggests India is not moving from one payment system to another; it is using both, with each serving different needs.
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