Despite the rapid rise in digital payments, cash continues to hold a strong position in the Indian payments ecosystem. According to Care Edge Ratings | Photo credit: DEEPAK KR/THE HINDU
Despite the massive increase in digital payments across the country, cash continues to hold a strong position in the Indian payments ecosystem, accounting for almost half of all transactions.
According to a report by Care Edge Ratings, cash use of private consumption expenditure (PFCE) is estimated to have maintained a 50 percent share in Q1-26.
Digital payments dominate retail transactions
The report highlighted that despite the tremendous growth in digital transactions over the years, cash remains resilient and co-exists with digital payment methods.
It stated, “Despite such tremendous growth in digital transactions, cash remains resilient. The use of cash in private consumer expenditure (PFCE) is estimated to reach a 50 percent share by 1Q26.” While digital payments are likely to dominate in the coming years, the traditional cash-based payment method still plays a crucial role in the Indian economy, especially in rural and semi-urban regions.
The Internet and smartphones stimulate adoption
On the other hand, the share of digital payments in retail transactions has reached an impressive 99.8 percent, making paper instruments such as checks virtually obsolete.
This transformation has been driven by strong policy initiatives, robust infrastructure support and deep fintech penetration in the country. The government’s push for a cashless economy, along with the rapid growth of the financial technology sector, has helped India move towards a more digitally driven payments structure.
Rising internet penetration has played a major role in this shift. Internet usage in India has grown from 60.7 percent in March 2021 to 70.9 percent in June 2025 and is expected to reach around 85 percent by 2028. In addition, the increasing use of smartphones has accelerated the adoption of digital payments, bringing previously unbanked populations into the formal digital economy and promoting financial inclusion.
UPI is leading the digital payments revolution
The report also highlighted that the Unified Payments Interface (UPI) has been the driving force behind this behavioral change. UPI recorded 54.9 billion transactions in Q1FY26 and 185.9 billion transactions in FY25. It grew at a compound annual growth rate (CAGR) of 49 percent between FY23 and FY25, showing strong adoption even in tier 2 and tier 3 cities.
The report also states that UPI is expected to continue its rapid growth, further cementing its dominance in the Indian digital payments landscape, while cash continues to co-exist as a preferred mode of payment for many.
Published on October 14, 2025
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