India’s rapid shift to digital payments has not cut the country’s need for physical cash. Deputy Governor Shirish Chandra Murmu said cash in circulation keeps growing at double‑digit rates, making future demand harder to predict.
The trend is strongest in rural and semi‑urban areas, among low‑income groups, older people and small businesses. These segments still rely heavily on paper money for daily transactions.
RBI produces between 28 billion and 30 billion banknotes each year across six denominations. About 21 billion notes are withdrawn annually, leaving a total of roughly 176 billion notes in circulation.
A key reason for the high volume is the denomination mix, which favours lower‑value notes. More of these smaller notes are needed to complete transactions of the same value.
To improve durability, RBI is exploring surface coatings and polymer substrates for lower denominations. This move could make notes last longer and reduce replacement costs.
The government has already approved field trials of 1 billion ₹10 polymer notes and 1 billion ₹20 polymer notes. The pilot is planned for the beginning of FY28, provided the trials succeed.
RBI has started the procurement process for polymer substrate and will test the notes under Indian climatic and usage conditions. Polymer and paper notes are expected to circulate together during the trial phase.
The central bank’s challenge is not just how fast digital payments spread, but how they affect, or fail to affect, people’s need for cash.
Murmu said RBI’s currency‑demand projections use a five‑year forward assessment. The model incorporates factors such as circulation levels, GDP growth, interest rates, food inflation and the pace of digital‑payment adoption.
Despite the rise of digital payments, cash remains a significant mode of payment in India. Reliable production, distribution and replacement of banknotes remain a core responsibility of the RBI.