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

India A Huge Country

Chandigarh Noida New Delhi Jaipur Lucknow

Guw ahati Kanpur Bhopal Aham adabad Dew as Patna Salboni Calcutta Calcutta Nagpur Mum bai Mum bai Byculla Nasik Bhuaneshw ar

Population: 1 billion
North to South: 3,200 km West to East: 3,000 km

Hyderabad

Hyderabad

Press
Mysore Banglore

Mint Issue Offices

Reserve Bank of India

Area: 3,288,000 sq. km

Per-capita Income

Chennai

Trivandrum

Distribution of Currency Dimension (value)

250000 200000 150000 100000 50000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Rs.2,448 billion, i.e., US $ 49 billion currently

Reserve Bank of India

Distribution of Currency Dimensions (volume)

45000 40000 35000 30000 25000 20000 15000 10000 5000 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

41 billion pieces in 2002

Reserve Bank of India

Dimensions

Enormous volume of lower denominations

% share of denominations
500 3% 100 29% 1000 0% 1,2,5 19%

50 17%

20 2%

10 30%

1,2,5 10 20 50 100 500 1000

Reserve Bank of India

Dimensions

Too little value of the lower denominations

% share of denominations
1000 3% 500 28% 1,2,5 10 1% 5% 20 1%

50 15%

100 47%

1,2,5 10 20 50 100 500 1000

Reserve Bank of India

Agencies Involved

Reserve Bank of India

Flow of Notes & Coins

NOTES COINS

Public

Chest branches

Chest branches & RBI Offices

Public

RBI Offices

4 mint-linked RBI Offices

Presses
Reserve Bank of India

4 Mints

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 banks account and withdrawal, debit
Reserve Bank of India

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

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 banks 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

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

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

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 RBIs annual needs:

Notes: Coins:

about 12,000 mn pieces about 5,000 mn pieces

Reserve Bank of India

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

Cross-movement of Currency
Chandigarh Noida New Delhi Jaipur

Lucknow

Guw ahati Kanpur Bhopal Aham adabad Dew as Patna Salboni Calcutta Calcutta Nagpur Mum bai Mum bai Byculla Nasik Bhuaneshw ar

Hyderabad

Hyderabad

Mysore

Banglore

Chennai

Fresh Notes/Coins from Press/Mint pass on to the Press banks/public only through Mint RBI offices hence crossIssue Offices movement
Reserve Bank of India

Trivandrum

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

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

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

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

Breaking the impasse

Million pieces 1200
1000 800 600 400 200 0 2001 July 2001 Sept 2001 Nov 2002 Jan 2002 Mar

Special methods announced enabling higher output in processing Installation of processing systems (BPS 1060S) in 9 Offices Shredding & briquetting in all offices

Reserve Bank of India

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

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

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

Thank you

Reserve Bank of India