Ten years after demonetisation, India’s payment habits have changed significantly, but physical currency remains deeply embedded in the economy. QR codes and UPI payments are now common at tea stalls, vegetable markets and retail outlets, yet cash continues to be held and used across the country.
Currency in circulation rose from Rs 17.77 lakh crore on November 8, 2016, to Rs 43.16 lakh crore on October 23, 2026. This represents an increase of nearly 143 per cent.
Digital payments have expanded at the same time. The Unified Payments Interface processed 25.46 billion transactions worth Rs 31.53 lakh crore in October 2026 alone. The parallel rise in cash and digital transactions points to a continuing cash paradox: the adoption of digital payments has not led Indians to abandon physical money.
Currency demand remains strong
The Reserve Bank of India’s Annual Report, released in May 2026, recorded an 11.9 per cent increase in the value of banknotes in circulation during the financial year 2025-26. The volume of banknotes grew by 10.5 per cent during the same period.
By the end of March 2026, banknotes in circulation were valued at approximately Rs 41.24 lakh crore. The total value of physical currency was higher when coins were included.
The upward movement continued into the current financial year. Currency in circulation reached Rs 43.16 lakh crore on October 23, 2026, marking a 13.7 per cent increase over the corresponding period a year earlier.
An RBI survey of households and small retailers also found a continued strong preference for cash usage. Although the central bank did not provide a detailed breakdown of the survey results, its conclusion indicated that the expansion of digital payments had not removed the demand for physical currency.
UPI growth has not replaced cash
Launched in 2016, UPI has become a major part of India’s payment infrastructure. Annual UPI transaction volume grew from 1.78 crore in 2016-17 to more than 24,162 crore in 2025-26.
Over the same period, the value of UPI transactions increased from Rs 7,000 crore to approximately Rs 314 lakh crore. The growth continued in 2026, with 25.46 billion transactions worth Rs 31.53 lakh crore recorded in October.
Consumers now routinely use digital payments for groceries, restaurant bills, utility services, shopping and low-value purchases. However, using a QR code at one shop does not prevent someone from withdrawing cash for other needs.
For many people, digital payments have therefore become an additional payment choice rather than a complete substitute for currency notes.
Why people continue to hold cash
Cash remains linked to habit, convenience and financial preparedness. Someone may use UPI for regular purchases while still keeping a few thousand rupees at home or in a wallet for emergencies. The money may not be spent immediately, but it remains available when required.
An RBI research paper published in 2023, titled Cash versus Digital Payment Transactions in India: Decoding the Currency Demand Paradox, examined the reasons behind this trend.
The paper identified precautionary holdings and the use of cash as a store of value as two key reasons for continued currency demand. In effect, people keep cash not only for transactions but also to feel financially prepared.
It also found that cash usage as a transaction method was declining even as demand for currency continued to increase. This indicates that cash and digital payments can expand at the same time.
Physical money is particularly useful where internet connectivity, digital infrastructure or access to banking services is limited. Cash transactions do not require a smartphone, a payment application or a functioning network.
For small businesses, daily-wage workers and those handling frequent small-value payments, currency notes continue to offer practical convenience.
Rs 500 notes dominate currency value
Denomination-wise data from the RBI show that Rs 500 notes made up 85.5 per cent of the total value of banknotes in circulation as of March 31, 2026.
By volume, however, Rs 500 notes accounted for 41.2 per cent of all banknotes. Rs 10 notes represented 16.1 per cent, while Rs 100 notes accounted for 15.7 per cent.
The figures indicate that high-value notes dominate the overall value of currency, while smaller denominations continue to constitute a significant portion of the physical money supply.
The RBI’s data further show that the withdrawal of Rs 2,000 notes, announced in May 2023, was largely complete. By March 31, 2026, 98.45 per cent of the Rs 3.56 lakh crore worth of such notes in circulation when the announcement was made had returned to the banking system.
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