1. DISTRIBUTION OF NOTES AND COINS IN INDIA
Currency Conference 2002
Honolulu, Hawaii
(Some slides have been added in the presentation for clarity)
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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
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3. Distribution of Currency -Dimension (value)
Rs.2,448 billion, i.e.,
US $ 49 billion currently
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4. Distribution of Currency - Dimensions (volume)
41 billion pieces in 2002
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5. Dimensions – Enormous volume of lower denominations
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6. Dimensions – Too little value of the lower denominations
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7. Agencies Involved
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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
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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
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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
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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
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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
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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
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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
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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
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16. Cross-movement of Currency
Fresh Notes/Coins from Press/Mint pass on to the banks/public only through RBI offices – hence cross-movement
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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
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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 (3.6 bn pieces)
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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
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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
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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
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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
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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
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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
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25. Thank you
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