Despite the decline in the share of cash transactions in certain transactions due to the increasing use of digital payments, the volume of money in circulation continues to grow at double-digit rates. This situation makes it difficult to forecast future demand for cash and complicates the process of planning the production and distribution of cash for the Reserve Bank of India (RBI), stated Shirish Chandra Murmu, Deputy Governor of the RBI.
Murmu noted that the adoption of digital payments in India over the last decade has been revolutionary, but cash has not decreased, especially in rural and semi-urban areas, among the elderly population, low-income groups, and small businesses.
He emphasized that in recent years, the RBI has annually issued between 28 and 30 billion banknotes across six denominations and disposed of about 21 billion units per year. Currently, 176 billion banknotes are in circulation in India. For comparison, at the end of last year, approximately 56 billion US dollars and 30 billion euros were in circulation.
According to Murmu, the growth in the number of banknotes in India is partly due to the mixing of denominations, which weighs more towards lower denominations, naturally resulting in more notes passing through hands for the same transaction amount.
Speaking at a focus group discussion on global cash management organized by the Bank of Indonesia in Jakarta on August 13, Murmu highlighted the scale of logistics managed daily by the RBI. He also reported that the RBI is studying ways to increase the durability of banknotes, including applying surface coatings to the substrate and issuing polymer notes for lower denominations.
The Government of India has approved field trials of one billion polymer banknotes of ₹10 and ₹20. The RBI plans to start circulating these pilot polymer notes from the beginning of the financial year 2028, provided the trials and operational assessment are successful. The central bank has initiated a tender process to procure polymer substrate and will test the notes under Indian climate and usage conditions before deciding on wider implementation.
Furthermore, the RBI is working to reduce the carbon footprint of the cash cycle by optimizing its distribution network and improving the recycling of banknote bricks. Murmu believes that cash management remains a key responsibility of central banks despite the rise of digital payments and stresses the importance of maintaining public trust in physical currency.
He added that maintaining trust in cash through clean notes, secure logistics, and a reliable currency ecosystem is fundamental to preserving monetary sovereignty. RBI's forecasts regarding currency demand are based on a five-year outlook, with transactional demand assessed considering factors such as changes in cash in circulation, GDP growth, interest rates, food inflation, and the pace of digital payment adoption.
The RBI's clean note policy, effective since 1999, requires the central bank to provide citizens with high-quality banknotes in the desired denomination and location. Murmu clarified that banks have quality parameters to assess circulating notes, and unfit notes are replaced.
Murmu also noted that India has developed significant domestic capacity across the entire currency production chain. The country's paper banknote factories, four currency printing presses, and ink manufacturing units belong to and are controlled by the RBI and the Government of India. This allows India to maintain domestic production of high-security banknotes across six denominations. Currency distribution across the country is carried out through a decentralized network consisting of 19 regional RBI offices and a much larger network of bank-managed cash vaults.