Cash Persists: Payments Preferences and Currency Holdings in India

Anirudh Tagat, Mehmet Özmen and Pushpa L. Trivedi

Economic Notes, 2026, vol. 55, issue 2

Abstract: This research delves into the ‘paradox of cash’ that persists despite the proliferation of alternative payment methods, which have seemingly displaced paper currency as a medium of exchange. We examine the determinants of cash holdings and consumer payment preferences using novel payment diaries data from 2019 in India, a country known for its strong reliance on cash transactions. Despite recent policies aimed at reducing cash usage, we find that 94% of all transactions were carried out in cash. Cash holdings vary in response to well‐established socio‐demographic and economic factors, but also by behavioural parameters such as risk aversion, life satisfaction and attitudes toward tax evasion. The use of cash as a payment method varies by attitudes toward cash use and is non‐linear in transaction size. These findings are robust to changes in the specification as well as to treating cash holdings as endogenous. We conclude by discussing the implications of our findings for policy, particularly in the context of promoting digital payments in India.

Date: 2026
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