The growth of currency in circulation (CIC), which serves as an indicator of cash demand, has slowed to 4-6 percent in recent years. This trend is attributed to a structural shift towards digital payments, post-pandemic normalization, the phased withdrawal of ₹2,000 notes, and increased formalization, as indicated in a Reserve Bank of India (RBI) study.
The study notes a slight year-on-year increase in CIC for 2024-25, driven by higher rural demand and election-related expenditures. However, real CIC growth turned negative in 2023-24 and remained modest in 2024-25, suggesting a decrease in inflation-adjusted cash demand.
In contrast, digital payments as a share of GDP have surged to over 800 percent, with the pandemic accelerating adoption in both volume and value, according to the study “Impact of UPI on Cash Demand – Evidence from National and Subnational Levels,” authored by RBI officials Sakshi Awasthy and Subrat Kumar Seet, and published in the central bank’s latest monthly bulletin.
ATM Withdrawals Decline
Digital payments have shown robust growth over the past decade (2015-2025), achieving a compound annual growth rate of 48 percent by volume and 12.5 percent by value. Monthly trends indicate a sustained momentum in digital payments amid tapering CIC growth.
The reduction in cash reliance is further illustrated by a decline in the currency-to-demand deposits ratio, falling from 1.68 in 2015-16 to 1.31 in 2024-25, along with a consistent decrease in ATM cash withdrawals as a share of GDP since 2018-19. Since digital payments are supported by bank deposits, primarily demand deposits, a drop in the CIC-to-demand deposits ratio suggests a movement towards digital transaction methods.
The Rise of UPI
A significant factor in declining cash demand is the rise of the Unified Payments Interface (UPI). Transaction volumes through this fast payment system surged to 18,586 crore in 2024-25, up from 1,252 crore in 2019-20, with rapid growth observed post-COVID-19.
In under a decade, UPI has emerged as a dominant payment system, processing more than 17 billion transactions per month, accounting for 84 percent of total digital payment volumes and 9 percent of values in 2024-25.
The increased use of UPI for everyday low-value transactions is reflected in the rising share of peer-to-merchant (P2M) payments, a decreasing ticket size for UPI payments, and most P2M volumes falling within the sub-₹500 value range.
India’s payment ecosystem is diverse, encompassing both cash and a wide array of digital options. CIC has reverted from a peak of 14.4 percent of Gross Domestic Product (GDP) in 2020-21 to 11.7 percent in 2023-24, and further down to 11.2 percent in 2024-25.
Published on September 29, 2025.
