currency distribution

Reserve Bank of India

DISTRIBUTION OF NOTES AND COINS IN INDIA

Currency Conference 2002 Honolulu, Hawaii

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


Mint

Press

Issue Offices

Chandigarh

New Delhi Jaipur

Lucknow

Kanpur Patna

Guwahati

Ahamadabad Calcutta

Hyderabad

Banglore

Trivandrum

Chennai

Mumbai Byculla

Bhuaneshwar Nagpur

Mysore

Nasik

Dewas Salboni

Noida

Mumbai Hyderabad

Calcutta

Bhopal

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


Distribution of Currency -Dimension (value)

0

50000

100000

150000

200000

250000 19921993199419951996199719981999200020012002

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

US $ 49 billion currently


Distribution of Currency - Dimensions (volume)

0

5000

10000

15000

20000

25000

30000

35000

40000

45000 199119921993199419951996199719981999200020012002

41 billion pieces in 2002


Dimensions – Enormous volume of lower denominations

% share of denominations

1,2,519%

202%

5017%

10029%

5003%

10000%

1030%

1,2,51020501005001000


Dimensions – Too little value of the lower denominations

% share of denominations

1,2,51%

201% 50

15%

10047%

50028%

10003% 10

5% 1,2,51020501005001000


Agencies Involved

RBI

Banks(chests)

MOF

Govt Presses

Mints

Police Railways

RBI's Presses


Flow of Notes & Coins

Presses

RBI Offices

Chest branches

Public

NOTES

4 Mints

4 mint-linked RBI Offices

Chest branches & RBI Offices

Public

COINS


Network of Currency Chests

RBI is located only in 18 places for currency operationsDistribution of notes and coins throughout the country is done through designated bank branches, called chestsChest is a receptacle in a commercial bank to store notes and coins on behalf of the Reserve BankDeposit into chest leads to credit of the commercial bank’s account and withdrawal, debit


More on Currency Chest

Meets currency requirement of publicWithdraws unfit notesExchange facility from one denomination to anotherPayment requirement of the GovernmentExchange of mutilated notesAvoids frequent movement of cashChest branch operates with minimum cash balance


Currency Chest Mechanism

Net deposit /withdrawal of notes and coins at the chest is reported on daily basis to parent Issue OfficeOverall deposit or withdrawal leads to credit or debit of bank’s account in RBINet withdrawal from chests means expansion of currency and deposits means contractionNotes in circulation being the liability of RBI, it adjusts its asset-liability position centrally for such expansion or contraction


Movement of Treasure

Specially built trucks for short distance (journey completed during the day)Railways for long distanceGuarded by policeRemittance accompanied by officials of RBI to chestsFurther movement from chest to a branch done by the bank concerned


How much to print & mint

Incremental needsReplacement needsReserve NeedsStatistical analysis and long-term forecastPrinting/minting allocated between the presses/mints and delivery schedule decided in advance


Capacity of Presses & Mints

Total annual capacity of Presses: 18 bnCan print up to 28 bn with two shiftsTotal minting capacity: 4,700 mnRBI’s annual needs: Notes: about 12,000 mn pieces Coins: about 5,000 mn pieces


Challenges of Distribution

Size of the country and volume of currencySecurity and availability of railway wagons when requiredPolitical boundaries defining jurisdiction of Issue Offices lead to sub-optimal logisticsCross movement of currency is unavoidable


Mint

Press

Issue Offices

Chandigarh

New Delhi Jaipur

Lucknow

Kanpur Patna

Guwahati

Ahamadabad Calcutta

Hyderabad

Banglore

Trivandrum

Chennai

Mumbai Byculla

Bhuaneshwar Nagpur

Mysore

Nasik

Dewas Salboni

Noida

Mumbai Hyderabad

Calcutta

Bhopal

Cross-movement of Currency

Fresh Notes/Coins from Press/Mint pass on to the banks/public only through RBI offices – hence cross-movement


Challenges of Distribution (contd)

Security- police is preoccupied with other activities of priorityPrivate security is unavailable and not favouredTransport through railways involves enormous coordination of logisticsPrivatization of transport – introduced recently in respect of coins only


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)


Problem of plenty - the present transition

Enough printing capacity since 1999Governor announces clean note policyAll RBI offices receive enough fresh note supply; vaults full with old and new notesChests overflowing with soiled/unsorted notesAn apparent impasse


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


Breaking the impasse

0

200

400

600

800

1000

1200

2001July

2001Sept

2001Nov

2002Jan

2002Mar

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

Million pieces


Coin Distribution – Some new steps

Mobile van at city centresDistribution through milk cooperatives in the state of GujaratThrough Post Offices in rural areas – a beginning made in MaharashtraCoin dispensing machines in public places and bank branchesIssue of notes of lower denominations to bulk users by RBI is compulsorily accompanied by issue of some part in coins


Early results

Clean Note Policy made a successCurrency processing systems have stabilized in operationModernization of mints show resultsImport of coins and temporary printing of Rs.5 notes has improved the supply position


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 notesSorting of notes to get decentralized through banks or processing centres


Thank you

currency distribution

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