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RBI Cash Withdrawal Report: On one hand, inflation has started increasing in the country due to the Gulf War, while on the other hand people are busy withdrawing their cash from banks. Reports suggest that Rs 61,000 crore were withdrawn from Indian banks in the first 15 days of April. This is happening in India, where 46% of the transactions are digital and even the vegetable vendor takes payment by applying QR code. Then why suddenly people started withdrawing cash from banks? If we look at RBI data, today Rs 42.3 lakh crore is in circulation in India, which is the largest figure after demonetization.

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Why have people started withdrawing cash in India?

For the first time in 9 years after the demonetization of 2016, such a boom has been seen in the Indian economy, where people are withdrawing cash from bank accounts. Never before has the demand for cash increased so rapidly. Now the question arises why did this increase occur? Have people lost trust in banks? Are they not able to trust digital payments or is the threat of black economy increasing behind this cash? It is important to understand the reasons for this increase in cash withdrawals and the risks associated with it.

Why do people want to keep cash with them instead of keeping it in the bank?

According to Reserve Bank data, currency circulation has increased by 11.8% compared to last year. The figure of cash available with the public crossed Rs 39 lakh crore in April 2026. Rs 61,000 crore were withdrawn in the first 15 days of April alone. SBI report says that this trend of cash withdrawal started from October 2025 and in April 2026 it broke all records. There are three major reasons behind cash withdrawal – fear of tax, election cycle and the third biggest reason is precautionary demand.

Fear of tax: A few months ago, the Karnataka government had sent GST notices to 6000 traders. These were those traders who had not done GST registration. The government tracked their data with the help of UPI transactions and sent notices, after which UPI was boycotted in many southern states including Karnataka, Mysore. Traders started transacting in cash.

Electoral Connection: The demand for cash has also increased due to assembly elections in five states. Demand for cash increases in election environment. Despite the strictness of the Election Commission, cash was also seized at many places.

Low trust in banking system: People's trust in the banking system has started decreasing. Interest rates on FD have already reduced, so people are avoiding saving in banks. An increase in cash has also been seen due to precautionary demand. Due to changes in banking rules, increasing risks and rising inflation, middle class families are now moving towards keeping cash at home instead of depositing money. Due to increase in the prices of gold and silver, people have increased the flow of money in the market for profit. People are taking cash by selling gold, but instead of depositing it in the bank, they are keeping it at home.

Deteriorating balance of banks

If we look at cash withdrawals, there is a difference of up to 80% in the ratio of credit to deposits in big banks like HDFC, ICICI. This means that banks are giving more loans, but they are getting less FDs. Decrease in money deposited in banks is indicating great danger. Liquidity pressure is created due to reduced cash flow in banks. When banks have less money deposited, they will face problem of cash to distribute loans. This means that loans will start becoming expensive. Your home loan and car loan will become expensive. Due to reduction in deposits in banks, big companies will face difficulty in getting funds, which will affect the employment and development of the country.

Economy stuck in the trap of withdrawing money?

This withdrawal of cash can hollow out the country's economy. Loans will become costlier due to increase in cash withdrawals from banks and decrease in deposits. There will be shortage of funds to give to companies, which will affect employment and the economy of the country. Despite 10 years of Digital India, the rural economy still transacts on cash. This surge of cash shows the weakness of the economy, fear about taxes, black money in the electoral game and the weakness of the banking system. This increasing cash in the market is taking the country's economy back by ten years, from where an attempt was made to come out after demonetization.