Currency Management Presentation by Janaki Ravindran, Manager, Janaki Ravindran, Manager, Currency Chest, Kochi November 6, 2007

Issues in Currency Management November 6, print notes and mint coins print notes and mint coins distribute adequate notes and coins distribute adequate notes and coins maintain quality of notes in circulation maintain quality of notes in circulation withdraw unfit notes from circulation & destroy them withdraw unfit notes from circulation & destroy them keep up well secured processes keep up well secured processes Objectives of Currency Management …..

Issues in Currency Management November 6,  Incremental requirement-growth rate and inflation  Replacement requirement-soiled notes withdrawn from circulation  Reserve requirement-to meet contingencies  Statistical analysis and long-term forecast  Indent placed with the four printing presses and four Mints Currency Management–how much to print & mint.

Issues in Currency Management November 6, Combined capacity of the four Mints is 3700 million pieces per annum Combined capacity of the four Mints is 3700 million pieces per annum Annual capacity of the Presses is as under: Annual capacity of the Presses is as under: Press Capacity(mpcs) Nashik(GOI) 5800 Dewas (GOI) 2620 Mysore(BRBNMPL) 4770 Salboni(BRBNMPL) 4770 Total Capacity Currency Management in India– continued…….

Issues in Currency Management November 6, Flow of Notes & Coins Presses RBI Offices(20) Chest branches Public NOTES 4 Mints 4 mint-linked RBI Offices Chest branches & RBI Offices COINS

Issues in Currency Management November 6, Issues in Currency Management Mechanisation Mechanisation Trends in Counterfeiting Trends in Counterfeiting Security features of banknotes Security features of banknotes Committee on Customer Service (Tarapore Committee) recommendations Committee on Customer Service (Tarapore Committee) recommendations ICCOMS ICCOMS ISO Certification ISO Certification Future Agenda Future Agenda

Issues in Currency Management November 6, Processing of soiled notes- mechanisation 54 Currency Verification and Processing Systems installed and commissioned in all offices. 54 Currency Verification and Processing Systems installed and commissioned in all offices. 28 Shredding and Briquetting System installed and commissioned in all offices. 28 Shredding and Briquetting System installed and commissioned in all offices.

Issues in Currency Management November 6, Note Counting Machines at counters. Note Counting Machines at counters. Coin Dispensing machines in banking halls Coin Dispensing machines in banking halls Non-stapling of notes Non-stapling of notes Note Sorting Machines at all chest based banks/branches. Note Sorting Machines at all chest based banks/branches. Mechanisation continued…

Issues in Currency Management November 6, Trends in Counterfeiting Menace and Concerns  High quality of counterfeit notes.  Use of counterfeit for various illegal and nefarious activities.  GOI’s High Level Committee examined the entire gamut of currency management  Recommendations for additional security features, especially in high denominations

Issues in Currency Management November 6, Recent Developments to combat the menace of counterfeiting Enhanced security features Enhanced security features Publicity campaigns on security features of currency notes Publicity campaigns on security features of currency notes Study of counterfeit notes detected Study of counterfeit notes detected Initiation of R & D in counterfeit detection Initiation of R & D in counterfeit detection

Issues in Currency Management November 6, Overt security features Detected without aid of device Detected with aid of device Watermark Watermark Security Thread Security Thread Intaglio Intaglio Perfect Register Perfect Register Identification Mark Identification Mark Optically variable Ink Optically variable Ink Latent Image Latent Image Micro lettering Micro lettering Fluorescence Fluorescence Optical Fibres Optical Fibres

Issues in Currency Management November 6, Need for Revised Security Features Security features need to be reviewed and updated from time to time in order to Security features need to be reviewed and updated from time to time in order to Take advantage of latest research and technology in the field Take advantage of latest research and technology in the field To help prevent counterfeiting and stay ahead of counterfeiters To help prevent counterfeiting and stay ahead of counterfeiters Have machine-readable security features for mechanised processing of notes Have machine-readable security features for mechanised processing of notes

Issues in Currency Management November 6, Factors influencing decision to change design & security features of banknotes Public & user survey Threat analysis Technical expertise Human perception studies Design & security features of banknotes Incremental cost and benefit Counterfeit analysis Public education, authentication and enforcement Production, issuance and circulation

Issues in Currency Management November 6, New/Additional Security features Security Thread-Rs 100, Rs 500, Rs 1000 Security Thread-Rs 100, Rs 500, Rs 1000 Machine-readable windowed demetalised clear text magnetic security thread with exclusive colour shift from green to blue, 3 mm wide for Rs.1000 & Rs.500 and 2 mm for Rs.100 Machine-readable windowed demetalised clear text magnetic security thread with exclusive colour shift from green to blue, 3 mm wide for Rs.1000 & Rs.500 and 2 mm for Rs.100 Security Thread-Rs 10, Rs 20, Rs 50 Security Thread-Rs 10, Rs 20, Rs 50 Machine-readable windowed demetalised clear text magnetic security thread, 1.4 mm wide Machine-readable windowed demetalised clear text magnetic security thread, 1.4 mm wide

Issues in Currency Management November 6, New/Additional Security features Electrolyte Watermark of denominational numeral to be located alongside Mahatma Gandhi watermark Electrolyte Watermark of denominational numeral to be located alongside Mahatma Gandhi watermark Omron anti photocopying feature-to be included in Rs 100 and Rs 50, besides Rs 500 & Rs 1000 Omron anti photocopying feature-to be included in Rs 100 and Rs 50, besides Rs 500 & Rs 1000 Year of printing to be incorporated at the printing stage on the reverse of the bank note. Year of printing to be incorporated at the printing stage on the reverse of the bank note.

Issues in Currency Management November 6, Committee on Customer Service- Observations/Recommendations Chronic shortages of notes and coins have been largely alleviated Empowerment of the Common Person Simplification of Note Refund Rules Revamping of Citizens’ Charter for Exchange facilities Parallel supply of notes and coins not sustainable Early introduction of Rs 10 coins

Issues in Currency Management November 6, Committee on Customer Service- Observations/Recommendations Strong action in case of violation of RBI’s directions Revision of currency chest agreement Master Circulars in intelligible language Delegation of authority to the bank branches to be exhibited prominently Removal of inconveniences to the Common Person

Issues in Currency Management November 6, Customer Service-Study by BITS, Pilani on need and use behaviour of small coins-major findings Availability of small coins is satisfactory Availability of small coins is satisfactory Non-availability of 25 paise and 50 paise coins is mainly due to reluctance to use Non-availability of 25 paise and 50 paise coins is mainly due to reluctance to use The traders charge more from the customer or give an item of coin change. The traders charge more from the customer or give an item of coin change. customers 'do nothing' when trade does not give correct coin change. customers 'do nothing' when trade does not give correct coin change. The preferred lot size for coins is 50 for most denominations and 100 for Re 1 The preferred lot size for coins is 50 for most denominations and 100 for Re 1

Issues in Currency Management November 6, Implementation of Integrated Computerized Currency Operations and Management System (ICCOMS) The Institutional Framework DCM at Central Office DCM at Central Office Issue Departments at 18 Regional Offices. 1 Issue sub-Office at Lucknow and 1 Currency Chest at Kochi Issue Departments at 18 Regional Offices. 1 Issue sub-Office at Lucknow and 1 Currency Chest at Kochi The currency chest system maintained by the banks and State Treasuries The currency chest system maintained by the banks and State Treasuries

The ICCOMS Project-Main Objectives Improve Operational Efficiency Improve Operational Efficiency Faster and Accurate Accounting Faster and Accurate Accounting Improve MIS and Planning Improve MIS and Planning Better Monitoring and Control Better Monitoring and Control Better Customer Service Better Customer Service

Issues in Currency Management November 6, The ICCOMS Project – Main Components… Transaction Processing System at the ID (General) and Cash Departments Transaction Processing System at the ID (General) and Cash Departments Work flow system in Cash Dept. and other relevant areas Work flow system in Cash Dept. and other relevant areas Currency Chest Reporting System Currency Chest Reporting System MIS at IDs MIS at IDs MIS at DCM MIS at DCM

Issues in Currency Management November 6, Scope of ICCOMS – DCM  Planning for Currency Issue  Allocation and Distribution of Currency  Monitoring of Currency Stock, Distribution, Processing, Accumulation, Forgeries, Reconciliation of Accounts etc.  Performance and Exception Monitoring  Infrastructure Planning

Issues in Currency Management November 6, Present Status  The Vendor (M/S CMC Ltd.) has been awarded the contract as per the recommendations of the Project Committee after due bidding process.  Vendor has completed a study of the user requirements by examining the SRS prepared by the Bank earlier. Vendor also visited a few ROs to study the end user requirements.  The project has been completed and all Regional Offices have commenced `live-run’ on the Currency Chest Reporting System (CCRS) and the Chest Accounting Module (CAM) of ICCOMS – ID component. It is an on-line process and once these two components are completed the Currency Management Information System (CMIS) Module at DCM will be taken up for implementation.

Issues in Currency Management November 6, ISO Certification in currency management Activities of currency management service oriented Citizens’ Charter can form the basis for measuring quality of service Single Window Service Implementation of Clean Note Policy Computerisation of Work Flow

Issues in Currency Management November 6, ISO Certification-DCM and ID at Hyderabad and Kolkata Documented set of procedures In-house awareness training on stipulated procedures Training to officials of banks and government departments Monitoring & Control Mechanism such as Statutory Audit, Concurrent Audit, Management Audit & Systems Inspection

Issues in Currency Management November 6, ISO Certification-Scope of Activities Ensure standardisation of printed notes Supply of notes to currency chests Maintain quality of notes in circulation Process of withdrawal of soiled notes Disposal of soiled notes Exchange of notes and coins Adjudication of mutilated notes Monitor and control circulation of counterfeit notes

Issues in Currency Management November 6, Currency Management - Future Contain the volume of notes in circulation. Contain the volume of notes in circulation. Coin Circulation – increase the value Coin Circulation – increase the value Simplification / rationalization of procedures-decentralization. Simplification / rationalization of procedures-decentralization. Mechanization keeping in pace with the change in banking technology world-wide Mechanization keeping in pace with the change in banking technology world-wide Enhancement of security features Enhancement of security features

Issues in Currency Management November 6, Future Agenda Increase the life of bank notes Increase the life of bank notes Concept of flexible resource circle Concept of flexible resource circle Proximity and logistics should be the criteria Proximity and logistics should be the criteria Direct remittances from the Presses Direct remittances from the Presses Outsourcing of lower value note distribution on patterns similar to coins Outsourcing of lower value note distribution on patterns similar to coins Implementation of Integrated Computerised Currency Operations and Management System (ICCOMS) Implementation of Integrated Computerised Currency Operations and Management System (ICCOMS)

Issues in Currency Management November 6, Future Agenda-contd…… Revision of currency chest agreement Revision of currency chest agreement Penalty for breach or non-implementation of any part of the agreement Penalty for breach or non-implementation of any part of the agreement Penalty in monetary terms Penalty in monetary terms Suspension of chest facility in extreme cases Suspension of chest facility in extreme cases

Issues in Currency Management November 6, Future Agenda-contd…… Levying of Penal interest for Wrong/delayed/non reporting of the currency chest transactions Wrong/delayed/non reporting of the currency chest transactions Shortage or loss of currency found in the chest or small coin depot Shortage or loss of currency found in the chest or small coin depot Unsorted notes remitted by a chest Unsorted notes remitted by a chest Amounts kept in safe custody in sealed covers, trunks, etc. on behalf of Courts, Government Departments, etc., and included in the chest balance Amounts kept in safe custody in sealed covers, trunks, etc. on behalf of Courts, Government Departments, etc., and included in the chest balance Shortage/forged notes in remittance received from the currency chest Shortage/forged notes in remittance received from the currency chest

Issues in Currency Management November 6, Future Agenda-contd…… Levying of Penal interest for Deficiency in customer service such as not extending exchange facilities for notes and coins Deficiency in customer service such as not extending exchange facilities for notes and coins Not displaying information/notices regarding services rendered to the customers in writing in branch premises Not displaying information/notices regarding services rendered to the customers in writing in branch premises Violation of the Reserve Bank's instructions/ guidelines Violation of the Reserve Bank's instructions/ guidelines Reserve Bank may consider suspension/ withdrawal of the currency chest facility in case of persistent non-compliance Reserve Bank may consider suspension/ withdrawal of the currency chest facility in case of persistent non-compliance

Issues in Currency Management November 6, Currency Management Thank You