Despite digital surge, cash remains India’s crucial payment mode: RBI’s Murmu

Mumbai: Despite the rapid adoption of digital payments, cash remains a significant mode of payment in the Indian economy, and preserving trust in cash is central to maintaining monetary sovereignty, said Reserve Bank of India deputy governor Shirish Chandra Murmu.

“If there is one thing I want to leave you with, it is this: cash remains a significant mode of payment in the Indian economy, and preserving trust in it, through clean notes, secure logistics, and a currency ecosystem people can rely on, is central to preserving monetary sovereignty itself,” Murmu said in a speech at the Global Cash Management 2026 discussion organised by Bank Indonesia in Jakarta on Thursday.

Murmu said the adoption of digital payments in India has been revolutionary to say the least, but cash in circulation has not declined, particularly among rural and semi-urban populations, low-income groups, older people and small businesses.

The persistence of cash alongside the digital payments boom has created what RBI calls a ‘cash paradox’.

“Currency in circulation continues to grow at double-digit rates even as cash’s share of individual transactions declines, thanks to growing digital payment adoption,” he said. “This combination makes future demand harder to predict, which complicates our planning for production and distribution capacity.”

Another challenge that the central bank faces is note durability. Looking ahead, RBI is examining ways to improve the durability of banknotes, including surface coatings and polymer notes for lower denominations, he said.

During the monetary policy conference on 5 August, Governor Sanjay Malhotra had said that the central bank is conducting a pilot to test polymer banknotes in Indian conditions, with the aim of rolling them out by 2027-28.

“This is still a pilot. We will test and check how they perform in Indian conditions, climate and other infrastructure that we have put in place. And it is only thereafter that we will see if we need to further scale it up, as it is or with changes,” Malhotra had said.

Polymer banknotes can incorporate advanced security features such as see-through windows, micro-optic holograms and specialized inks, making them harder to counterfeit. Around 60 countries, including Australia, Canada, the UK, New Zealand, Singapore, Vietnam, Malaysia, and Mexico, use polymer banknotes.

Another matter that Murmu touched upon was sustainability. He said that RBI is working to reduce the carbon footprint of the cash cycle: optimising our distribution network for efficiency and moving up the value chain in how we dispose of banknote briquettes.

The scale of India’s currency ecosystem remains enormous. RBI and the government produce between 28 billion and 30 billion banknotes every year across six denominations, while around 21 billion notes are disposed of annually. As of August, about 176 billion banknotes were in circulation in India, according to Murmu.

However, there is one caveat in fairness to the comparison. “…our count is driven partly by a denomination mix weighted toward lower-value notes, which naturally means more pieces change hands for the same value of transactions. Even so, the volume gives you a sense of the scale of the logistics we manage every day,” he said.

The RBI uses a five-year forward projection to estimate currency demand, factoring in transactional demand and replacement requirements. Transactional demand is influenced by factors such as GDP growth, interest rates, food inflation, and the pace of digital payment adoption, while replacement demand reflects the need to retire old or unfit notes.

Murmu also highlighted India’s efforts to maintain self-reliance in currency production. Banknote paper mills, four currency printing presses and ink production units are owned and controlled by RBI and the government, allowing the country to sustain production of up to 30 billion notes a year.

The logistics of moving cash across the country are supported by 19 RBI regional offices and a wider network of currency chests operated by partner banks. More than 250,000 ATMs and cash dispensers, bank branches and millions of business correspondents provide last-mile access to cash, particularly in rural areas and smaller towns.