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Overview of Currency Distribution in India - Challenges and Solutions

Explore the distribution of notes and coins in India, covering aspects such as dimensions, agencies involved, movement of treasure, printing and minting capacities, challenges, and solutions. Learn about the Reserve Bank of India's mechanisms, chest branches, currency chest operations, and the process involved in ensuring the smooth flow of currency throughout the country.

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Overview of Currency Distribution in India - Challenges and Solutions

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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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