“Intriguingly, though the volume of cash in circulation has continued to grow but the ‘cash-to-GDP’ ratio has declined in recent years to 11 per cent in 2025-26 (FY26) from 14.4 per cent in FY21,” the report said. The models showed that the direction of change of currency and GDP may be the same, but incremental GDP growth is now being less financed by cash and more through UPI (Unified Payments Interface).
Commenting on the dichotomy that both UPI transactions as well as currency in circulation have surged, the report pointed out several factors behind the rise in cash demand.
One is that per-month cash withdrawal from ATMs (Automated Teller Machines) could surpass the long-term average of ₹2.5 lakh, with states like Karnataka, Tamil Nadu, and West Bengal showing an increasing trend in such withdrawals.
Moreover, the Karnataka Commercial Taxes Department issuing around 18,000 goods and services tax (GST) notices to small traders and vendors for UPI transactions exceeding the ₹40 lakh registration threshold between 2022 and 2025 may have acted as a disincentive to UPI transactions, the report said.
“The motive to hold cash has also jumped particularly in rural areas with low interest rates and the penchant for consumption,” the report said, noting that declining interest rates may have also resulted in higher precautionary demand for money.
Another reason for the surge in CIC could be that with the rise in precious metals prices, there could have been rising currency in circulation through recycling of gold/silver from households.
According to the report, currency with the public (CWP), which accounts for nearly 97.6 per cent of CIC, also reached an all-time high of around ₹39 trillion, registering an annual growth of 11.5 per cent. The report said that if current trends persist, incremental growth in CWP during FY26 could surpass the post-pandemic spike recorded in FY21.
 "Unified Payments Interface, UPI, UPI Payment")