Digital Payments Explode to 1 Billion Daily...But Indians Stick to 'Cash'

▲ Indian Rupee

Despite the explosive growth of digital payments in India, the circulation of cash continues its strong upward trend, creating a coexisting phenomenon.

According to the British public broadcaster BBC on September 15 (local time), an analysis of data from the Reserve Bank of India (RBI) shows that even with the rapid growth of digital payments, physical currency remains deeply embedded throughout the economy. While digital transactions via the Unified Payments Interface (UPI) are nearing 1 billion daily, the volume of cash in circulation is also paradoxically increasing sharply. The central bank has 176 billion banknotes in circulation, with 28 to 30 billion new banknotes consistently issued each year.

Economists analyze that cash functions not just as an everyday payment method but also as a key means of storing value and preparing for disasters. Economist Anirudh Tagat explained that cash serves not merely as a means of payment but also as a store of value, a hedge against disasters, and a symbol of monetary sovereignty. He diagnoses that even if mobile apps and digital payment networks replace payment functions, they cannot fully absorb the demand for cash as a crisis response tool or a safe asset.

India's vast informal economy and unique transaction culture are also factors extending the lifespan of cash. Enormous amounts of cash are still used in large-scale transactions, such as real estate deals, to avoid high stamp duties and fair value assessments. Moreover, the anxiety of overspending caused by the excessive convenience of digital payments, along with risks of communication failures and cyberattacks, also increases psychological reliance on physical banknotes.

In various European countries, the function of currency as a critical national infrastructure is being re-evaluated, with citizens advised to hold a certain level of cash in preparation for large-scale power outages or national emergencies. The Reserve Bank of India also faces the policy challenge of balancing the promotion of digital payment innovation with the management of cash circulation networks and investment in the introduction of new currency.

[Article Summary]

-In India, UPI digital payments reach nearly 1 billion daily, but with 176 billion banknotes in circulation, cash demand is surging.

-Experts analyze that cash firmly functions not just for simple payments but also as a means for emergency preparedness and value storage.

-The large informal economy combined with anxieties about system failures solidifies the coexistence of digital payments and cash.

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