Notes in circulation rose to Rs 34.8 trn in 2024: RBI's monthly bulletin

CAGR of notes in circulation in value terms higher than volume terms last year

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The volume of Notes in Circulation (NiC) has increased in recent years, despite a decline in cash usage in India since the 1990s. This growth is partly attributed to precautionary cash holdings during the Covid-19 pandemic. 

 

According to the Reserve Bank of India's (RBI) monthly bulletin, NiC rose to around ~34.8 trillion in 2024 from around ~2.1 trillion in 2001. The views expressed in the bulletin 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 that 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 the previous two decades,” the report said.

 

While NiC growth outpaced GDP growth between 1994 and 2004, the 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. This reduces their need for precautionary cash holdings.