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India's cash withdrawals jump 12%, highest since 2017 demonetisation
05 May 2026

India is witnessing a major shift in its cash economy as currency in circulation (CIC) has increased by over ₹61,000 crore in the first half of April.

The total CIC now stands at a record ₹42.3 lakh crore. This spike is 11.8% higher than last year and the highest since early 2017 after demonetization.

The trend could affect liquidity in the banking system, economists have warned.

Impact on banking liquidity
Liquidity concerns

The sustained rise in cash demand over the last six months and the entire last fiscal year has raised concerns about its impact on banking liquidity.

HDFC Bank predicts that liquidity surplus will average around 1% of deposits in the first half of this fiscal year, easing to 0.5% in the second half.

However, if CIC remains elevated due to rising inflation and increased rural demand, liquidity balances could move toward lower levels of this forecast range.

Factors driving currency circulation
Demand drivers

The rise in cash demand is attributed to several factors.

Abhishek Upadhyay, co-head of research at ICICI Securities Primary Dealership, said that rural demand and a cut in GST on essential goods have contributed to this trend.

Soumya Kanti Ghosh, Group Chief Economic Advisor at SBI, added that lower interest rates and high prices of precious metals may also be driving currency circulation through gold and silver recycling from households.