RBI Finds Cash Demand Harder to Predict as Digital Payments Grow
Murmu said the RBI still manages 176 billion banknotes as cash use remains strong in rural areas and among low-income households.
- Reserve Bank Deputy Governor Shirish Chandra Murmu addressed the Global Cash Management conference in Jakarta on August 13, identifying a "Cash Paradox" where cash circulation rises despite digital payment adoption.
- This paradox complicates production planning because predicting future currency demand is difficult, Murmu said, as the central bank typically makes five-year forward projections based on "transactional demand" and "replacement demand."
- India currently has around 176 billion banknotes in circulation, while the RBI produces 28-30 billion banknotes annually and disposes of about 21 billion pieces, underscoring the massive scale of daily logistics.
- By comparison, roughly 56 billion and 30 billion banknotes of other major currencies were in circulation at year-end; the RBI is exploring polymer notes and surface coatings to extend banknote life.
- UPI payment volumes jumped 21 per cent in FY26 even as cash circulation grew nearly 12 per cent, prompting Murmu to ask, "If any of you have found a good way to model this tension, I would genuinely like to hear it.
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RBI Deputy Governor Highlights 'Cash Paradox' Amid Digital Payment Surge
Reserve Bank Deputy Governor S C Murmu has highlighted the 'cash paradox' where currency in circulation continues to grow despite a significant increase in digital payments. This trend complicates the RBI's forecasting and planning for currency production and distribution, prompting the central bank to seek solutions and explore ways to extend banknote life and reduce the carbon footprint of the cash cycle.
Despite digital surge, cash remains India's crucial payment mode: RBI's Murmu
RBI deputy governor Shirish Chandra Murmu said cash remains vital to India's economy despite the digital payments boom, citing a ‘cash paradox’ where currency in circulation keeps rising even as cash's transaction share falls.
The Economic Times
Times of IndiaRBI finds cash demand harder to predict as digital payments grow
RBI faces challenges forecasting demand for banknotes as currency in circulation continues to grow at double-digit rates despite rising digital payments. Deputy Governor SC Murmu said cash remains widely used, particularly in rural areas, among low-income groups and small businesses.
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