Cash in circulation rises, complicating RBI's currency planning: SC Murmu

Despite cash’s declining share in individual transactions amid growing adoption of digital payments, currency in circulation continues to grow at double-digit rates. This combination is making future cash demand harde to predict and complicating the Reserve Bank of India’s (RBI’s) planning for cash production and distribution capacity, said Shirish Chandra Murmu, deputy governor, RBI.

“In the previous decade, adoption of digital payments in India has been revolutionary to say the least, yet cash in circulation has not declined, especially in rural and semi-urban areas, among low-income groups, older populations, and small businesses,” Murmu said.

Murmu highlighted that over the past few years, the RBI has produced between 28 billion and 30 billion banknotes annually across six denominations and disposed of roughly 21 billion pieces a year.

As of now, 176 billion banknotes are in circulation in India. By comparison, roughly 56 billion US dollar bills and 30 billion euro banknotes were in circulation at the end of last year.

He said that in India the count is driven partly by a denomination mix weighted towards lower-value notes, which naturally means more pieces change hands for the same value of transactions.

“Even so, the volume gives you a sense of the scale of the logistics we (RBI) manages every day,” Murmu said while speaking at a focus group discussion on global cash management organised by Bank Indonesia in Jakarta on August 13.

Murmu also said the RBI is exploring ways to extend the durability of banknotes, including surface coatings on the substrate and polymer notes for lower denominations.

The Indian government has approved the introduction of one billion polymer banknotes of Rs 10 and Rs 20 for field trials. The RBI is targeting circulation of pilot polymer banknotes from the beginning of FY28, subject to successful field trials and operational assessment.

The central bank has initiated the tendering process for procuring polymer substrate and will test the notes under Indian climatic and usage conditions before deciding on a wider rollout.


The RBI is also working to reduce the carbon footprint of the cash cycle by optimising its distribution network and improving the disposal of banknote briquettes.

Cash management remains a key responsibility for central banks despite the growth of digital payments, Murmu said, underscoring the importance of maintaining public confidence in physical currency.

“If there is one thing I want to leave you with, it is this: cash remains a significant mode of payment in the Indian economy, and preserving trust in it, through clean notes, secure logistics, and a currency ecosystem people can rely on, is central to preserving monetary sovereignty itself,” Murmu said.

Murmu highlighted that the RBI’s currency demand projections are based on a five-year forward assessment, with transactional demand estimated using factors including changes in currency in circulation, gross domestic product (GDP) growth, interest rates, food inflation and the pace of digital payment adoption.

The RBI’s Clean Note Policy, in place since 1999, commits the central bank to making good-quality banknotes available to citizens in the denomination and place of their choice. Banks have been given quality parameters to assess notes in circulation, with notes found unfit being replaced, Murmu said.

Murmu highlighted that India has also built significant domestic capacity across the currency production chain. The country’s banknote paper mills, four currency printing presses and ink production units are owned and controlled by the RBI and the Government of India.

This allows India to maintain domestic production of banknotes with high-security features across six denominations. Distribution of currency across the country is managed through a decentralised network comprising 19 RBI regional offices and a much larger network of currency chests operated by banks, Murmu said.

Currency chests can be operated by designated commercial banks, cooperative banks or government treasuries on behalf of the RBI. The cash held in these chests remains the property of the RBI.

The central bank licenses currency chests after assessing the financial strength of the operating bank and requires them to meet technical standards, including minimum processing capacity and adequate certified note-sorting machines for processing soiled notes and detecting counterfeit notes.

Currency chest operations are monitored by the RBI, with withdrawals and deposits reported in real time through its Central Cash Accounting System. Currency chests are also subject to periodic inspection and audit.