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Do you remember the last time you walked into an ATM to actually withdraw cash? Not to stand there for the air conditioning, but to press a few buttons and wait for the notes to come out.
These days, it’s UPI for groceries, UPI for chai, UPI for splitting rent, UPI for almost everything. Cash feels like a backup plan, not the main character.
Now here’s the twist.
Even though most of us feel like we’ve moved on from cash, the total amount of currency in circulation in India has climbed to an all-time high. As of the end of January 2026, it stood at around ₹40 lakh crore. That’s the highest ever. At the same time, UPI transactions are also smashing records month after month.
Sounds contradictory, right? If digital payments are exploding, shouldn’t cash be fading away?
Apparently, it doesn’t work like that.
A recent State Bank of India report points out that the rise in physical currency is happening alongside unprecedented growth in digital payments. So while we are busy scanning QR codes and tapping our phones, the country as a whole is holding more cash than ever before.
Let’s simplify this.
Think of the economy as a balloon that’s getting bigger every year. As incomes rise, businesses expand, and transactions increase, the total amount of money circulating also increases. So even if digital payments are taking over many daily transactions, the overall demand for money in the system can still go up.
Here’s where it gets more interesting.
Even though the absolute amount of cash has increased, cash has become smaller relative to the size of the economy. The cash-to-GDP ratio has fallen from 14.4% in FY20-21 to around 11% in FY25-26.
That suggests that new economic growth is being powered more by digital payments than by physical notes.
Look at UPI. UPI transactions touched ₹28.3 lakh crore in January. On average, it moves around ₹28 trillion a month. That’s nearly 70% of the total currency stock in the economy, in just 30 days.
Banks are clearly adjusting to this shift. Both public and private sector banks have reduced their ATM networks over the past year.
Private banks cut their ATM count from about 79,884 in FY24 to 77,117 in FY25. Public sector banks, which still run the largest network, trimmed their numbers slightly too. Much of this consolidation came from shutting down off-site ATMs that saw fewer users as people migrated to digital channels.
So yes, digital payments are dominating daily transactions. But here’s the curveball.
Even as UPI grows, people are still holding more cash. Currency with the public, which makes up about 97.6% of total currency in circulation, reached roughly ₹39 trillion in January.
That’s an 11.5% increase compared to last year, much faster than the previous year’s growth. If this trend continues, cash growth could even surpass the spike we saw after the pandemic.
Why would that happen?
Part of the answer lies in the denomination mix. After the RBI withdrew ₹2,000 notes in May 2023, the share of ₹500 notes rose sharply. By March 2025, ₹500 notes accounted for 86% of the total value of banknotes in circulation, and that share has increased further this year. Larger denomination notes now dominate the value side of cash.
At the same time, UPI is largely replacing smaller notes. Around 86% of person-to-merchant UPI transactions by volume are below ₹500.
That means digital payments are mainly competing with ₹50, ₹100, and ₹200 notes used for everyday purchases like snacks, vegetables, fuel, or small retail payments. So small-ticket transactions are going digital, while higher-value notes are still circulating and being held.
There’s also a comfort element. Cash works without the internet. It works in rural areas. It works during network outages. For many people, holding some cash feels safe and practical, even if they don’t use it every day.
When you zoom out, the picture becomes clearer. India isn’t becoming cashless. It’s becoming digitally driven, but cash isn’t disappearing. The economy is expanding, digital rails like UPI are handling a growing share of transactions, banks are trimming physical infrastructure, and yet the total pile of currency keeps rising.
So the next time you pass an ATM and wonder who still uses it, remember this. Somewhere, someone is withdrawing cash. And somewhere else, someone is paying with a QR scan. Both are true at the same time. That’s the real story of how India pays today.
