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INDIA

DISTRIBUTION OF NOTES AND COINS IN INDIA

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INDIA

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  1. DISTRIBUTION OF NOTES AND COINS IN INDIA Currency Conference 2002 Honolulu, Hawaii (Some slides have been added in the presentation for clarity) Reserve Bank of India

  2. India – A Huge Country Population: 1 billion North to South: 3,200 km West to East: 3,000 km Area: 3,288,000 sq. km Per-capita Income Reserve Bank of India

  3. Distribution of Currency -Dimension (value) Rs.2,448 billion, i.e., US $ 49 billion currently Reserve Bank of India

  4. Distribution of Currency - Dimensions (volume) 41 billion pieces in 2002 Reserve Bank of India

  5. Dimensions – Enormous volume of lower denominations Reserve Bank of India

  6. Dimensions – Too little value of the lower denominations Reserve Bank of India

  7. Agencies Involved Reserve Bank of India

  8. Flow of Notes & Coins Public NOTES COINS Chest branches Chest branches & RBI Offices Public 4 mint-linked RBI Offices RBI Offices Presses 4 Mints Reserve Bank of India

  9. Network of Currency Chests • RBI is located only in 18 places for currency operations • Distribution of notes and coins throughout the country is done through designated bank branches, called chests • Chest is a receptacle in a commercial bank to store notes and coins on behalf of the Reserve Bank • Deposit into chest leads to credit of the commercial bank’s account and withdrawal, debit Reserve Bank of India

  10. More on Currency Chest • Meets currency requirement of public • Withdraws unfit notes • Exchange facility from one denomination to another • Payment requirement of the Government • Exchange of mutilated notes • Avoids frequent movement of cash • Chest branch operates with minimum cash balance Reserve Bank of India

  11. Currency Chest Mechanism • Net deposit /withdrawal of notes and coins at the chest is reported on daily basis to parent Issue Office • Overall deposit or withdrawal leads to credit or debit of bank’s account in RBI • Net withdrawal from chests means expansion of currency and deposits means contraction • Notes in circulation being the liability of RBI, it adjusts its asset-liability position centrally for such expansion or contraction Reserve Bank of India

  12. Movement of Treasure • Specially built trucks for short distance (journey completed during the day) • Railways for long distance • Guarded by police • Remittance accompanied by officials of RBI to chests • Further movement from chest to a branch done by the bank concerned Reserve Bank of India

  13. How much to print & mint • Incremental needs • Replacement needs • Reserve Needs • Statistical analysis and long-term forecast • Printing/minting allocated between the presses/mints and delivery schedule decided in advance Reserve Bank of India

  14. Capacity of Presses & Mints • Total annual capacity of Presses: 18 bn • Can print up to 28 bn with two shifts • Total minting capacity: 4,700 mn • RBI’s annual needs: • Notes: about 12,000 mn pieces • Coins: about 5,000 mn pieces Reserve Bank of India

  15. Challenges of Distribution • Size of the country and volume of currency • Security and availability of railway wagons when required • Political boundaries defining jurisdiction of Issue Offices lead to sub-optimal logistics • Cross movement of currency is unavoidable Reserve Bank of India

  16. Cross-movement of Currency Fresh Notes/Coins from Press/Mint pass on to the banks/public only through RBI offices – hence cross-movement Reserve Bank of India

  17. Challenges of Distribution (contd) • Security- police is preoccupied with other activities of priority • Private security is unavailable and not favoured • Transport through railways involves enormous coordination of logistics • Privatization of transport – introduced recently in respect of coins only Reserve Bank of India

  18. Supply Bottleneck • Scarce Printing capacity for over a decade till 1999 • Pace of replacement of old currency was slow leading to deteriorating quality • Inefficiencies in arranging return flow of notes as chests hardly sorted notes as fit/unfit • Temporary respite through imports in 1997-98 (3.6 bn pieces) Reserve Bank of India

  19. Problem of plenty - the present transition • Enough printing capacity since 1999 • Governor announces clean note policy • All RBI offices receive enough fresh note supply; vaults full with old and new notes • Chests overflowing with soiled/unsorted notes • An apparent impasse Reserve Bank of India

  20. Breaking the impasse • Capacity to process and destroy notes in RBI needed to increase so that • Stock of soiled notes within RBI could be destroyed releasing vault space • Expeditious withdrawal of notes from chests could be initiated Reserve Bank of India

  21. Breaking the impasse • Special methods announced enabling higher output in processing • Installation of processing systems (BPS 1060S) in 9 Offices • Shredding & briquetting in all offices Million pieces Reserve Bank of India

  22. Coin Distribution – Some new steps • Mobile van at city centres • Distribution through milk cooperatives in the state of Gujarat • Through Post Offices in rural areas – a beginning made in Maharashtra • Coin dispensing machines in public places and bank branches • Issue of notes of lower denominations to bulk users by RBI is compulsorily accompanied by issue of some part in coins Reserve Bank of India

  23. Early results • Clean Note Policy made a success • Currency processing systems have stabilized in operation • Modernization of mints show results • Import of coins and temporary printing of Rs.5 notes has improved the supply position Reserve Bank of India

  24. Meeting the challenge of distribution • The volume should be contained within sustainable levels by • Shift in printing from lower to next higher denominations (a perceptible shift already visible) • Coinise Rs.10 denomination • Try out other substrate for printing – coating of paper or polymer, although currently there is no plan to introduce polymer notes. • Banks have been compelled to dispense with the age-old practice of stapling of notes • Sorting of notes to get decentralized through banks or processing centres Reserve Bank of India

  25. Thank you Reserve Bank of India

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