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Currency Management

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

  2. Objectives of Currency Management ….. • print notes and mint coins • distribute adequate notes and coins • maintain quality of notes in circulation • withdraw unfit notes from circulation & destroy them • keep up well secured processes Issues in Currency Management November 6, 2007

  3. Currency Management–how much to print & mint. • Incremental requirement-growth rate and inflation • Replacement requirement-soiled notes withdrawn from circulation • Reserve requirement-to meet contingencies • Statistical analysis and long-term forecast • Indent placed with the four printing presses and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 Issues in Currency Management November 6, 2007

  4. Currency Management in India–continued……. • Combined capacity of the four Mints is 3700 million pieces per annum • 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 17960 Issues in Currency Management November 6, 2007

  5. Flow of Notes & Coins COINS NOTES 4 Mints Presses 4 mint-linked RBI Offices RBI Offices(20) Public Chest branches & RBI Offices Chest branches Issues in Currency Management November 6, 2007

  6. Issues in Currency Management • Mechanisation • Trends in Counterfeiting • Security features of banknotes • Committee on Customer Service (Tarapore Committee) recommendations • ICCOMS • ISO Certification • Future Agenda Issues in Currency Management November 6, 2007

  7. Processing of soiled notes-mechanisation • 54 Currency Verification and Processing Systems installed and commissioned in all offices. • 28 Shredding and Briquetting System installed and commissioned in all offices. Issues in Currency Management November 6, 2007

  8. Mechanisation continued… • Note Counting Machines at counters. • Coin Dispensing machines in banking halls • Non-stapling of notes • Note Sorting Machines at all chest based banks/branches. Issues in Currency Management November 6, 2007

  9. 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, 2007

  10. Recent Developments to combat the menace of counterfeiting • Enhanced security features • Publicity campaigns on security features of currency notes • Study of counterfeit notes detected • Initiation of R & D in counterfeit detection Issues in Currency Management November 6, 2007

  11. Overt security features Issues in Currency Management November 6, 2007

  12. Need for Revised Security Features • 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 • To help prevent counterfeiting and stay ahead of counterfeiters • Have machine-readable security features for mechanised processing of notes Issues in Currency Management November 6, 2007

  13. 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 Production, issuance and circulation Public education, authentication and enforcement Issues in Currency Management November 6, 2007

  14. New/Additional Security features • 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 • Security Thread-Rs 10, Rs 20, Rs 50 • Machine-readable windowed demetalised clear text magnetic security thread, 1.4 mm wide Issues in Currency Management November 6, 2007

  15. New/Additional Security features • 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 • Year of printing to be incorporated at the printing stage on the reverse of the bank note. Issues in Currency Management November 6, 2007

  16. 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, 2007

  17. 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, 2007

  18. Customer Service-Study by BITS, Pilani on need and use behaviour of small coins-major findings • Availability of small coins is satisfactory • 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. • 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 Issues in Currency Management November 6, 2007

  19. Implementation of Integrated Computerized Currency Operations and Management System (ICCOMS) The Institutional Framework • DCM at Central Office • 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 Issues in Currency Management November 6, 2007

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

  21. The ICCOMS Project – Main Components… • Transaction Processing System at the ID (General) and Cash Departments • Work flow system in Cash Dept. and other relevant areas • Currency Chest Reporting System • MIS at IDs • MIS at DCM Issues in Currency Management November 6, 2007

  22. 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, 2007

  23. 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, 2007

  24. 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, 2007

  25. 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, 2007

  26. 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, 2007

  27. Currency Management - Future • Contain the volume of notes in circulation. • Coin Circulation – increase the value • Simplification / rationalization of procedures-decentralization. • Mechanization keeping in pace with the change in banking technology world-wide • Enhancement of security features Issues in Currency Management November 6, 2007

  28. Future Agenda • Increase the life of bank notes • Concept of flexible resource circle • Proximity and logistics should be the criteria • Direct remittances from the Presses • Outsourcing of lower value note distribution on patterns similar to coins • Implementation of Integrated Computerised Currency Operations and Management System (ICCOMS) Issues in Currency Management November 6, 2007

  29. Future Agenda-contd…… • Revision of currency chest agreement • Penalty for breach or non-implementation of any part of the agreement • Penalty in monetary terms • Suspension of chest facility in extreme cases Issues in Currency Management November 6, 2007

  30. Future Agenda-contd…… Levying of Penal interest for • Wrong/delayed/non reporting of the currency chest transactions • Shortage or loss of currency found in the chest or small coin depot • 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 • Shortage/forged notes in remittance received from the currency chest Issues in Currency Management November 6, 2007

  31. Future Agenda-contd…… Levying of Penal interest for • 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 • 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 Issues in Currency Management November 6, 2007

  32. Currency Management Thank You Issues in Currency Management November 6, 2007