The growth in currency in circulation (CiC) in India has reached its highest level in five years, supported by substantial inflows through Foreign Currency Non-Resident (Bank), or FCNR(B), deposits. The increase has also contributed to a strong expansion in reserve money, according to the Reserve Bank of India’s (RBI’s) latest State of the Economy report. Data released by the central bank showed that currency in circulation stood at Rs 43.46 trillion as of October 15, 2026, marking a year-on-year increase of 13.5 per cent. Reserve money, meanwhile, rose 10.3 per cent annually to Rs 53.24 trillion.
The report, prepared by RBI staff members, highlighted the acceleration in currency circulation and its contribution to the growth of reserve money, adjusted for changes in the cash reserve ratio (CRR).
“Reserve money (adjusted for CRR) expanded at a robust pace with growth in currency in circulation recording its highest print over the past five years as on September 30, 2026,” the report said.
The RBI’s special foreign exchange swap facility, introduced on June 8, played a significant role in attracting foreign currency deposits. The facility covered FCNR(B) deposits, external commercial borrowings and overseas foreign-currency borrowings.
Banks had mobilised $133 billion through FCNR(B) deposits by August 31, when the window closed. These inflows contributed to the increase in reserve money, reflecting the liquidity support provided by the central bank since the beginning of the 2025-26 financial year.
Currency in circulation had already registered annual growth of 13.3 per cent during the fortnight ended September 30, before increasing further to 13.5 per cent as of October 15.
RBI Liquidity Measures May Moderate Reserve Money Growth
Despite the recent expansion, economists expect the pace of reserve money growth to ease as the central bank withdraws liquidity from the financial system.
The RBI had purchased government securities worth Rs 8.8 trillion through open market operations (OMOs) during FY26. It subsequently provided additional liquidity in FY27 through foreign exchange swap facilities.
“The central bank net bought ₹8.8 trillion of open-market-operation purchases in FY26, and in FY27, it also infused liquidity by the swap windows,” said Gaura Sen Gupta, chief economist, IDBI First Bank.
She added that currency demand and the RBI’s interventions in the foreign exchange market could put further pressure on liquidity.
“Due to continued forex intervention, as well as a pickup in currency leakage in the festival session, liquidity will tighten even further and reserve money growth will moderate,” she added.
Indian Economy Remains Resilient Amid Global Headwinds
The RBI report also pointed to the Indian economy’s ability to withstand external disruptions, supported by domestic demand, services activity and policy measures.
High-frequency economic indicators showed an improvement, while the country’s external sector continued to demonstrate resilience despite global uncertainties.
“Navigating this environment, the Indian economy has been anchored by solid macroeconomic fundamentals and policy interventions to cushion downside risks,” it said.
The central bank has also introduced regulatory measures aimed at limiting speculative activity in the foreign exchange market amid external pressures.
“The external headwinds are also being dealt with a slew of regulatory measures by the Reserve Bank to curb speculative activity in foreign exchange market,” the report said.
Strong Exports and Capital Flows Support External Sector
The report noted that sustained domestic consumption and the services sector had supported economic growth despite India’s dependence on imported energy. However, retail inflation had edged higher in recent months, with price increases becoming more widespread across commodities.
The RBI indicated that these inflationary trends would require an appropriate monetary policy response.
At the same time, foreign direct investment (FDI), external commercial borrowings (ECB) and remittance inflows strengthened in August. Robust export performance also helped narrow India’s trade deficit in September.
“Strong inflows under FCNR(B) swap window augmented reserves. FDI, ECB and remittance flows strengthened in August. With strong exports growth, the trade deficit narrowed in September,” it added.
