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Distribution of notes and coins in india l.jpg


Currency Conference 2002

Honolulu, Hawaii

(Some slides have been added in the presentation for clarity)

Reserve Bank of India

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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

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Distribution of Currency -Dimension (value)

Rs.2,448 billion, i.e.,

US $ 49 billion currently

Reserve Bank of India

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Distribution of Currency - Dimensions (volume)

41 billion pieces in 2002

Reserve Bank of India

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Dimensions – Enormous volume of lower denominations

Reserve Bank of India

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Dimensions – Too little value of the lower denominations

Reserve Bank of India

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Agencies Involved

Reserve Bank of India

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Flow of Notes & Coins




Chest branches

Chest branches & RBI Offices


4 mint-linked RBI Offices

RBI Offices


4 Mints

Reserve Bank of India

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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Thank you

Reserve Bank of India

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