Cash After Demonetisation: Why Physical Currency Still Reigns in India

Cash After Demonetisation Latest News

• November 8, 2026 marked ten years since PM Modi’s dramatic televised announcement demonetising ₹500 and ₹1,000 notes, aimed at curbing black money, counterfeit currency, and pushing India toward a cashless economy. 
• A decade later, RBI data reveals a striking paradox: despite a massive digital payments boom, currency held by the public has more than doubled since demonetisation — raising questions about whether the note ban achieved its core objective.

The Big Announcement and Immediate Impact

• On November 8, 2016, at 8 PM, PM Modi declared existing ₹500 and ₹1,000 notes invalid from midnight — denominations that made up ~86% of currency in circulation.
• The sudden cash crunch disrupted shops, businesses, and households nationwide; people queued for hours at banks and ATMs.
• GDP growth declined by nearly 1.5 percentage points; many small businesses shut down due to liquidity shortages.

‹ ›

The Long-Term Currency Trend

• Currency with the public stood at ₹17.97 lakh crore (November 4, 2016), crashed to ₹7.8 lakh crore by January 2017, but has since surged to ₹42.55 lakh crore (as of October 15, 2026) — a 137% increase over pre-demonetisation levels.
• Currency with the public = Currency in Circulation (CIC) minus cash held by banks.
• In calendar year 2026 alone (till October 16), cash with the public rose by ₹5.26 lakh crore (14.1%).
• A sharp spike occurred in 2020-21, driven by pandemic-induced cash hoarding for groceries and medical expenses during the Covid-19 lockdown.

Currency-to-GDP Ratio: A Mixed Signal

• The CIC-to-GDP ratio rose from 8.7% (2016-17) to 14.4% (2020-21), before settling at 12.1% in FY26 — nearly identical to March 2016’s 12.1%.
• Global Comparison: Japan (16%+), China (10.2%), US (7.3%) — India’s ratio is higher than the US and China but lower than Japan.
• A higher ratio indicates greater cash dependence; a lower ratio typically reflects stronger digitalisation and better monetary policy transmission.
• Importantly, a high ratio doesn’t necessarily signal lower economic sophistication.

Cash vs Digital: Coexistence, Not Replacement

• Despite RBI and government efforts toward a “less-cash society”, cash usage has not declined — it has grown alongside digital payments.
• Total digital payments (FY2025-26): ₹3,251.04 lakh crore (covering RTGS, retail transfers, cards, and prepaid instruments).
• Card and wallet transactions (FY2025-26): ~151,611 lakh transactions worth ₹30.31 lakh crore. 
  • Credit cards: ₹23.62 lakh crore (60,238 lakh transactions) — dominant by value.
  • Debit cards: ₹4.45 lakh crore (12,802 lakh transactions).
  • Wallets: ₹2.23 lakh crore, but highest transaction volume (78,571 lakh) — used for frequent, low-value payments.
• Comparison with FY2015-16: just 1,003.87 crore card transactions worth ₹29.39 lakh crore (debit cards dominant then).
• By value share in FY26: Credit cards (78%), Debit cards (14.7%), Wallets (7.4%).
• By volume share: Wallets (51.8%), Credit cards (39.7%), Debit cards (8.4%).

Conclusion

• A decade on, demonetisation’s cashless dream remains unrealised — cash and digital payments now coexist rather than compete. 
• India’s economy has formalised and digitised significantly, yet physical currency continues circulating robustly, proving that convenience, trust, and habit still make cash resilient in a rapidly digitalising nation.

Source: IE