NiC rises to Rs 34.8 tn but growth slows with shift to higher notes

Cash usage in India has slowed since the 1990s despite NiC rising to Rs 34.8 trillion in 2024, with increased ATM access and digital adoption impacting demand

While the secular growth in cash usage in India has declined since the 1990s, the volume of Notes in Circulation (NiC) has increased in recent years, partly due to precautionary cash holdings during the Covid-19 pandemic. According to the Reserve Bank of India’s (RBI) monthly bulletin, NiC rose from approximately Rs 2.1 trillion in 2001 to about Rs 34.8 trillion in 2024. However, the bulletin notes that the views expressed are those of the authors and do not necessarily represent the RBI’s official stance.

 

Over the past two decades, the demand for physical cash has evolved significantly. Factors such as the rapid expansion of bank branches and ATM networks, increased penetration of internet-enabled phones, and significant advancements in payment and settlement systems have contributed to a lower compound annual growth rate (CAGR) in NiC in the last decade. Between 2004 and 2024, in each of the two 10-year periods, the CAGR of NiC in value terms was higher than in volume terms, indicating a shift towards higher denomination notes.

 

“In each of the two 10-year periods between 2004 and 2024, CAGR of NiC in value was higher than that in volume, indicating a shift towards higher denominations. It is worth noting that the growth rate in NiC (in value terms) in the 10-year period between 2014 and 2024 was significantly lower as compared to that in the previous two decades,” the report said.

 

Notably, the growth rate of NiC (in value terms) between 2014 and 2024 was significantly lower compared to the previous two decades. Additionally, while NiC growth outpaced GDP growth between 1994 and 2004, this gap narrowed considerably in the subsequent two decades.

 

Between 2005 and 2014, the number of ATMs per lakh adults increased dramatically, with a CAGR of slightly over 25 per cent. Evidence suggests that during normal periods (i.e., periods not affected by events like COVID-19), easier access to ATMs reduces households’ cash holdings, as they are more comfortable maintaining lower balances, thereby reducing precautionary holdings.