Between 2015 and 2025, digital payments recorded a CAGR of 48% by volume and 12.5% by value | Photo Credit: AMIT DAVE

Growth of currency in circulation (CIC), which is taken as a proxy for cash demand, slowed to 4-6 per cent in recent years, driven by structural shift towards digital payments, post-pandemic normalisation, phased withdrawal of ₹2,000 notes, and greater formalisation, according to an RBI study.

A marginal rise (year-on-year) in 2024-25 reflects higher rural demand and election-related spending. Real CIC growth turned negative in 2023-24 and remained modest in 2024-25, suggesting decline in inflation-adjusted cash demand, per the study.

In contrast, digital payments (value) as a share of GDP have risen sharply to over 800 per cent, with the pandemic acting as a catalyst for increased adoption in both volume and value terms, according to the study ‘Impact of UPI on Cash Demand – Evidence from National and Subnational Levels’, by RBI officials Sakshi Awasthy and Subrat Kumar Seet, published in the Central bank’s latest monthly bulletin.

ATM withdrawals drop

Overall, total digital payments have exhibited robust growth over the last decade (2015- 2025), recording a compound annual growth rate of 48 per cent by volume and 12.5 per cent by value. Monthly trends show a broadly sustained digital momentum amid tapering CIC growth.

The shift away from cash is also evident in the decline in currency-to-demand deposits ratio to 1.31 in 2024-25 from 1.68 in 2015-16, and a steady fall in ATM cash withdrawals (as a share of GDP) since 2018-19.

Since digital payments are backed by bank deposits, mainly demand deposits, a decline in the CIC-to-demand deposits ratio — holding other factors constant — indicates a shift towards digital modes of transaction, whereas an increase in the ratio reflects a rising preference for cash.

Rise of UPI

A possible driver behind the decline in cash demand has been the rise of UPI. Transaction volumes logged under the fast payment mode surged to 18,586 crore in 2024-25 from 1,252 crore in 2019-20, with a marked acceleration post COVID-19.

In less than a decade, UPI has become a leading payment system, processing more than 17 billion transactions a month and overall, accounting for 84 per cent and 9 per cent of total digital payment volumes and values, respectively, in 2024-25.

Growing use of UPI for daily low-value transactions is evident from the rising share of peer-to-merchant (P2M) payments, narrowing ticket size of UPI payments, and the bulk of the P2M volumes falling within the sub-₹500 value band.

India has a diverse payment ecosystem, encompassing both cash and a broad suite of digital options. CIC has normalised from a peak of 14.4 per cent of Gross Domestic Product (GDP) in 2020–21 to 11.7 per cent in 2023–24 and further to 11.2 per cent in 2024–25.

Published on September 29, 2025