The puzzle of cash and UPI both touching record highs

After the rationalization of GST rates and amid festive-season demand, India's currency in circulation (CiC) climbed to record-high levels in late 2025 and early 2026.

- SOUMYA KANTI GHOSH & TAPAS PARIDA

In January, it touched ₹40 trillion. So far in 2025-26, CiC has increased by ₹2.76 trillion, 3.1 times the rise seen in the same period the previous year.Intriguingly, even as CiC has jumped, India continues to log record levels of Unified Payments Interface (UPI) transactions. For example, in January, the value of these stood at ₹28 trillion—or 70% of CiC. Simultaneously, the cash-to-GDP ratio has declined in recent years to 11.2% in 2025-26 from 14.4% in pandemic year 2020-21. This shows that even as economic activity has been expanding at a rapid pace, currency is expanding at a much slower pace as UPI transactions have been substituting those in cash, specifically for day-to-day dealings. Additionally, India's monthly cash withdrawals from ATMs could surpass the long-term average of ₹2.5 trillion, with their numbers in states such as Karnataka, Tamil Nadu and West Bengal showing an uptrend. So, what explains this puzzle of high CiC coexisting with high UPI swipes? There are at least four reasons.