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Digital payments are increasing rapidly in India, but the grip of cash has still not weakened. In May 2026, UPI created a new record of 2,320 crore transactions, while according to the data of the Reserve Bank of India, the currency in circulation in the country has reached about Rs 42 lakh crore. That means, on one hand, people are scanning QR codes for even small purchases, while on the other hand, they are also keeping large amounts of cash with them. Why is this happening? Is cash still the first choice of Indians, or are UPI and cash now fulfilling different needs? Let us understand India’s changing payment habits from data.
Why is the momentum of cash not stopping?
Unified Payments Interface i.e. UPI, completing its 10 years, has created a new identity as the world’s largest real-time payment platform. According to NPCI, more than 2320 crore transactions took place through UPI in May 2026, the total value of which was about Rs 29.90 lakh crore. On an average, 73.7 crore transactions took place every day. UPI is being used almost everywhere including small shopkeepers, carts, taxis, grocery stores and big showrooms. In comparison, only 35.8 crore transactions were done through IMPS (Immediate Payment Service), which clearly shows that UPI has taken the lead in digital payments.
What does the data say?
- In May 2026, 2320 crore transactions and Rs 29.9 trillion were transacted through UPI.
- Currency in circulation in the country reached a record level of about Rs 42 lakh crore.
- According to SBI Research, 97.6 percent of the total cash is directly with the public.
- About 86 percent of merchant payments of less than Rs 500 have now become digital.
- Rising gold prices, GST notices and the need for large transactions have maintained the demand for cash.
Still why Rs 42 lakh crore cash?
Despite this growth in digital payments, RBI figures show a different picture. At the time of demonetization in November 2016, the currency in circulation in the country was Rs 17.77 lakh crore, which increased to about Rs 42 lakh crore in May-June 2026. According to SBI Research, 97.6 percent of the total cash of the country is directly with the people and not with the banks. This makes it clear that Indian families still consider cash as safe savings. Even though small daily expenses are being incurred through UPI, people prefer to keep cash with them for emergencies, savings and big transactions.
After all, what is the reason for increase in demand for cash?
According to experts, there are many reasons behind this. Due to the continuous increase in gold prices, people are gaining cash by selling or mortgaging their old jewellery. At the same time, in some states, after small traders received GST notices on the basis of UPI transactions, many shopkeepers have started taking cash again. He believes that tax related questions arise less in cash transactions. Apart from this, due to reduction in interest rates, some people are finding it better to keep cash with them instead of keeping it in the bank. All these reasons have played a role in increasing the amount of cash in the market.
Small expenses through UPI, big deals still in cash
The method of payment in India is changing according to the need. Statistics show that about 86 percent of merchant transactions of less than Rs 500 have now become digital. That is, for small payments, UPI has significantly reduced the need for notes of Rs 10, 20 and 100. But even today cash is used more in real estate, farming, unorganized business and many big transactions. Even in rural areas, many small shopkeepers and customers consider cash payment to be easy and reliable. This is the reason why both cash and digital systems are running together in India.
Digital and cash will go together
Economists call this situation ‘cash paradox’. On one hand UPI is handling transactions worth Rs 28 to 30 lakh crore every month, while on the other hand cash is also continuously increasing. However, the cash to GDP ratio has come down from 14 percent in 2021 to 11 percent in 2026. This means that the use of cash is gradually decreasing in relation to the size of the economy. Experts believe that in the coming time, India will not be completely cashless, rather both digital payments and cash will complement each other.
5 important rules related to cash in India
1. How much cash can you keep at home?
There is no legal limit for keeping cash at home in India. You can keep as much cash as you want. However, if the Income Tax Department conducts an investigation or raid, you will have to explain where the money came from, such as salary, business, farming or any other legitimate income. If you are not able to prove its true source, then along with the tax, a penalty of up to 137% can also be imposed.
2. Cannot take cash more than Rs 2 lakh
Under Section 269ST of the Income Tax Act, it is prohibited to take Rs 2 lakh or more in cash from a single person in a single day, in a single transaction or for any single event (such as a wedding or function). If someone violates this rule, he may have to pay a fine equal to the entire amount received i.e. up to 100%.
3. Loan limit in cash
According to Section 269SS of the Income Tax Act, if a person takes a loan or deposit of Rs 20,000 or more, it cannot be accepted in cash. For this, it is necessary to use account payee cheque, bank transfer, UPI, RTGS or other electronic means. The purpose of this rule is to ban large cash transactions.
4. Keep an eye on depositing more cash in the bank
If Rs 10 lakh or more is deposited or withdrawn from a person’s savings account during a financial year, or the amount in a current account is Rs 50 lakh or more, then the bank sends this information to the Income Tax Department through ‘Statement of Financial Transaction (SFT)’. This does not mean that tax will be levied, but such transactions come under the supervision of the department.
5. How much cash can I take while going abroad?
According to the FEMA rules of the Reserve Bank of India (RBI), any Indian citizen can carry only a maximum of Indian currency (INR) up to Rs 25,000 while going abroad or returning from abroad. Carrying more Indian cash than this is against the rules.
