Explanation – Currency in circulation is the value of all the banknotes and coins that a country’s monetary authority has issued, minus the amount that has been removed from circulation. It is a key part of a country’s money supply.

Currency held by banks including the RBI, also known as vault cash, represents the physical cash that banks keep in their reserves to meet daily transaction demands. This cash is part of the total currency in circulation.

Currency held by the public refers to the physical cash that individuals and businesses hold for daily transactions. This cash is also part of the total currency in circulation.

Currency held by the government, such as cash held by government agencies or ministries, is not directly considered part of Currency in Circulation.

Electronic/digital currencies, such as cryptocurrency or digital payments like Paytm or Google Pay, are not considered part of Currency in Circulation. CiC specifically refers to physical currency, banknotes, and coins. Similarly, foreign currency in India is also not considered part of CiC.

Recently, currency in circulation has increased in India despite a significant growth in digital payments at the same time.

Source: Forum IAS