While digital payments have surged in recent years, cash transactions continue to be important. Cash and digital payment trends are examined, and the factors that potentially drive payment method choices and the constraints faced by customers are explored. Transactional demand for currency is driven by personal choices, comfort, and trust, and may not stem from either education levels, income categories, technological awareness or age. Similarly, precautionary demand for currency is heightened in times of uncertainty. Keeping the nuances of currency use in mind is necessary before policy actions are taken on the circulation of currency.

India pays digitally, yet hoards cash. As India goes digital, with 20 billion payments approximating ₹250 trillion through digital modes of payment, cash transactions paradoxically have not de­cli­ned (Malhotra 2025; RBI 2025). In 2024–25, even as retail digital payments marked an increase of 17.9% in value terms and 35% in volume, banknotes in circulation continued to grow robustly at 6% by value and 5.6% by volume. What drives the contours of this choice between cash and card (digital)? Should we nudge people towards cashless transactions? Will that matter for economic outcomes? Can cash and the cashless coexist in a vibrant payment system, as in a few developed countries such as Switzerland, Germany and Japan?

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