MUMBAI: Even because the nation hurtles towards a digital future with the Unified Funds Interface (UPI) clocking 60 crore transactions a day, a curious contradiction persists: money is prospering.Within the month of Could, UPI transactions hit a a report 1868 crore transactions for Rs 25.1 lakh crore, up from 1789 crore (Rs 23.9 lakh crore) in April.Nonetheless, on the finish of March, foreign money in circulation was a report Rs 36.86 lakh crore. The Rs 500 observe, specifically, has develop into the dominant type of money, making up 41 per cent of all banknotes by quantity and accounting for a staggering 86 per cent of whole worth. In distinction, smaller denominations comparable to Rs 20, Rs 50, Rs 100 and Rs 200 collectively account for lower than that, each in quantity (35.6 per cent) and worth (10.9 per cent) -despite the state’s push for a extra granular, digitised money economic system.Finance minister Nirmala Sitharaman not too long ago reiterated the federal government’s dedication to smaller denominations and digital funds, noting efforts to make sure that “foreign money can be within the decrease denominations, used far more than the upper.” In April, the Reserve Financial institution of India mandated that by Sept 30, 2025, at the very least 75 per cent of ATMs should be able to meting out Rs 100 or Rs 200 notes, with this determine rising to 90 per cent by March 2026. The purpose is to scale back dependence on high-value notes and enhance on a regular basis transactional ease.But the resurgence of money is just not pushed by transaction wants. Bankers say the phenomenon is best defined by precautionary hoarding, a behavioural legacy of the Covid pandemic. An RBI examine helps this view, drawing hyperlinks between money utilization and perceived financial insecurity. The examine, intriguingly, makes use of satellite tv for pc photos of nighttime illumination as a proxy for financial exercise. It finds a correlation between brighter regions-indicative of upper GDP and tax collection-and decrease foreign money use. As formal financial exercise rises, money in circulation tends to fall. The latest spike in money, the RBI suggests, displays a lingering desire for liquidity in unsure occasions.This isn’t unprecedented. From 2005 to 2014, the speedy rollout of ATMs corresponded with a drop in family money holdings, as simpler entry lowered the perceived must retailer wealth in bodily foreign money, the RBI examine mentioned. However the pandemic has reversed a few of that progress. For now, even in a nation the place Rs 10 might be paid by QR code, cash-especially in massive denominations-continues to loom massive.The RBI has efficiently withdrawn a lot of the Rs 2000 banknotes from circulation with none disruption. The latest feedback by the finance minister and the RBI have led many to imagine that measures to scale back Rs 500 banknotes could also be within the offing.