Gap Between ATM Withdrawals And Cash In Circulation Widens

A new report from the State Bank of India reveals a significant surge in precautionary cash holding across India, with currency in circulation reaching a record high of ₹41.6 trillion in FY26, even as digital payment platforms like UPI continue to break transaction records.

The gap between per capita currency in circulation and ATM withdrawals has widened sharply, signalling a rise in precautionary cash holding, according to a report by State Bank of India.

The gap increased to ₹9,127 in FY26 from ₹1,804 in FY24. The report attributed the trend to global uncertainties and behaviour seen during earlier disruptions.

While cash levels have risen in absolute terms, the cash-to-GDP ratio has declined from 14.4 per cent in FY21 to 12.1 per cent in FY26, indicating that currency growth remains aligned with overall economic expansion.

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Rising Currency in Circulation

Currency in circulation increased 11.9 per cent year-on-year to a record high of ₹41.6 trillion in FY26, with an incremental rise of ₹4.4 trillion, the highest since the post-demonetisation period.

At the same time, Unified Payments Interface (UPI) transactions also touched record levels, rising 20.6 per cent in value to ₹314 trillion and 30 per cent in volume to 241.6 billion.

Further, the growth in per capita currency holding has broadly tracked income expansion over the past decade, but at a marginally slower pace, indicating the rising role of digital payments.

Per capita gross domestic product rose from ₹71,609 in FY12 to ₹2.5 trillion in FY26, registering a compound annual growth rate (CAGR) of 9.4 per cent.

Per capita currency in circulation increased from ₹8,762 to ₹29,324, at a slightly lower CAGR of 9.0 per cent, the report said.

The 40-basis-point gap between the two growth rates is nearly equivalent to per capita UPI transactions, estimated at ₹1,301 in FY26, the report said, while cautioning that UPI figures reflect high-frequency usage rather than stock of money.

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Cash and Digital Payments Complement Each Other

The report said that the sharp rise in currency in circulation alongside record digital transactions reflects increased precautionary demand for cash rather than a contradiction in payment trends.

Both cash and digital payments are "indispensable" and complement each other, with only marginal substitutability.

While UPI is predominantly used for small-value transactions, about 86 per cent of person-to-merchant and 60 per cent of person-to-person transactions are below ₹500, cash continues to be held for emergencies and informal usage.

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Denomination Patterns and CBDC Status

On denomination patterns, ₹500 notes accounted for about 86 per cent of the total value of currency. Following regulatory measures to improve the availability of lower denominations, the share of ₹100 notes increased to 8.2 per cent in March 2026 from 6.2 per cent a year ago.

The report also noted that central bank digital currency (CBDC) remains at a nascent stage, with circulation at ₹1,016 crore, or about 0.02 per cent of total currency in circulation.

Feature Presentation: Rajesh Alva/Rediff