The HinduReserve Bank of IndiaPayments Council of India

Cash in public hands surges to ₹41.8 lakh crore as UPI growth slows to 18.7%; charges on online transactions could nudge India towards cash economy

Cash in public hands has surged to ₹41.8 lakh crore, reflecting a 13% year-on-year increase, as UPI transaction growth slows to 18.7%. Legislative changes allowing charges on UPI transactions may further push consumers towards a cash-based economy, according to recent RBI data analysis by The Hindu.

livemint.com livemint.com17 August 2026 · 16:31 UTC
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Cash in public hands has seen a significant rise, reaching ₹41.8 lakh crore as of July 31, 2027, marking a 13% year-on-year increase. This trend contrasts with the slowing growth of Unified Payments Interface (UPI) transactions, which have dropped to 18.7% in FY27, down from previous years where growth rates were as high as 133% in FY20 and 105% in FY22.125

The Reserve Bank of India (RBI) data analyzed by The Hindu indicates that while UPI transactions have historically outpaced cash growth, the margin is narrowing. The growth of cash in circulation reached 17% during FY21 but fell to around 4% by FY24. However, it rebounded to 6.5% in FY25 and 12% in FY26.34

Recent legislative changes, including the passage of the (Amendment) Bill, 2026, could further influence this trend. The bill allows the government to reinstate merchant discount rate (MDR) charges on UPI transactions, potentially leading to a shift in consumer behavior towards cash transactions. The Hindu reported that if UPI charges are implemented, it could nudge public habits more decisively towards cash, reversing the trend of digital payments.

As the government debates these changes, the implications for the future of cash and digital transactions in India remain significant, with potential impacts on consumer behavior and the overall economy.

Key Insight
“The Hindu's RBI data analysis shows cash growth peaked at 17% in FY21, fell to 4% by FY24, then rebounded to 12% in FY26. UPI's growth decelerated from 133% in FY20 to 18.7% in FY27, with the margin between cash and UPI narrowing.”
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“Cash in public hands is increasing over the past five years, according to RBI data analysis by The Hindu.”
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EARLIER IN THE STORY:
MDR on UPI payments: six rules govt must settle before charges can start; Finance Minister says consumers won't pay transaction fees
Business Standard
MDR on UPI payments: six rules govt must settle before charges can start; Finance Minister says consumers won't pay transaction fees

The Taxation and Other Laws (Amendment) Bill, 2026 raised concerns that UPI may no longer remain free, but the Finance Minister clarified that consumers will not pay transaction charges, and any future MDR would be restricted to certain merchant transactions.

Mdr UpiMerchant Discount RateNational Payments Corporation Of India
2026-08-17
TL;DR by CuriousCats.ai
  • The Taxation and Other Laws (Amendment) Bill, 2026 raised concerns that the Unified Payments Interface (UPI) may no longer remain free, but the Finance Minister clarified that consumers would continue to make payments without charges, and any future MDR would be restricted to certain merchant transactions.
  • The Bill amends Section 10A of the Payment and Settlement Systems Act, 2007, replacing the existing reference to electronic payment modes with one or more electronic modes of payment as the Central Government may, by notification, specify.
  • The Bill provides that no bank or system provider shall impose any charge on persons making or receiving payments through specified electronic modes, but the government has clarified that consumers will not pay a transaction charge for UPI payments.
  • The government has said any MDR, if introduced, would apply only to a limited set of merchant transactions above a specified threshold and at a nominal rate, lower than MDRs on debit and credit cards.
  • The Bill does not define which merchants would be liable for MDR, nor does it specify the categories or the threshold; the first question is how the eligible merchant category will be defined, with possible tests based on annual turnover, transaction volume, transaction value, merchant category, or a combination.
  • The Bill does not specify the transaction-level conditions for a possible MDR; a future framework must clarify whether the charge applies due to a merchant crossing a turnover or transaction threshold, an individual payment exceeding a specified value, or both.
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