Reserve Bank of India Deputy Governor Shirish Chandra Murmu flagged a "cash paradox" as currency circulation grows despite a rise in digital payments.
This trend presents a significant policy challenge for the central bank. While digital platforms are being adopted rapidly, the continued expansion of physical cash suggests that digital tools have not yet replaced the fundamental utility of currency for many citizens.
Murmu said the central bank is observing a scenario where currency in circulation is growing at double-digit rates [1]. This growth persists even as the share of cash in individual transactions continues to fall, creating a contradictory financial landscape.
The paradox highlights a gap between how people execute small, frequent transactions, and how they hold or move larger sums of money. Digital payments have boomed across India, yet the physical volume of money remains high.
"We are seeing a cash paradox where currency in circulation is growing at double‑digit rates even as cash’s share in transactions is falling," Murmu said.
The Deputy Governor said that the transition to a digital economy is not a linear process. He said that the coexistence of these two trends is a defining characteristic of the current Indian economy.
According to Murmu, cash remains a vital component of India’s payment ecosystem despite the rapid adoption of digital platforms. This suggests that the infrastructure for digital payments has not fully displaced the perceived security or accessibility of physical notes.
RBI officials continue to monitor these patterns to ensure financial stability. The central bank must balance the push for a less-cash society with the reality of sustained currency demand.
“"We are seeing a cash paradox where currency in circulation is growing at double‑digit rates even as cash’s share in transactions is falling."”
The 'cash paradox' suggests that while digital payments have successfully captured the high-frequency, low-value transaction market, physical cash is likely being used for larger stores of value or in sectors where digital trust remains low. For the RBI, this means monetary policy cannot rely solely on digital metrics to gauge liquidity, as the demand for physical currency remains an essential pillar of the national economy.
