Currency-presentation.ppt

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 CountryPopulation: 1 billionNorth to South: 3,200 kmWest to East: 3,000 kmArea: 3,288,000 sq. kmPer-capita Income


Bhopal

Calcutta

Hyderabad

Mumbai

Noida

Salboni

Dewas

Nasik

Mysore

Nagpur

Bhuaneshwar

Byculla

Mumbai

Chennai

Trivandrum

Banglore

Hyderabad

Calcutta

Ahamadabad

Guwahati

Patna

Kanpur

Lucknow

Jaipur

New Delhi

Chandigarh

Press

Mint

Issue Offices

Distribution of Currency -Dimension (value)Rs.2,448 billion, i.e., US $ 49 billion currently


Distribution of Currency - Dimensions (volume)

41 billion pieces in 2002


Dimensions Enormous volume of lower denominations


Dimensions Too little value of the lower denominations


Agencies Involved


Flow of Notes & CoinsPressesRBI OfficesChest branchesPublicNOTES4 Mints4 mint-linked RBI OfficesChest branches & RBI OfficesPublicCOINS


Network of Currency ChestsRBI 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 banks account and withdrawal, debit


More on Currency ChestMeets 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 MechanismNet 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 banks 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 TreasureSpecially 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 & mintIncremental needsReplacement needsReserve NeedsStatistical analysis and long-term forecastPrinting/minting allocated between the presses/mints and delivery schedule decided in advance


Capacity of Presses & MintsTotal annual capacity of Presses: 18 bnCan print up to 28 bn with two shiftsTotal minting capacity: 4,700 mnRBIs annual needs:Notes:about 12,000 mn piecesCoins:about 5,000 mn pieces


Challenges of DistributionSize 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


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


Bhopal

Calcutta

Hyderabad

Mumbai

Noida

Salboni

Dewas

Nasik

Mysore

Nagpur

Bhuaneshwar

Byculla

Mumbai

Chennai

Trivandrum

Banglore

Hyderabad

Calcutta

Ahamadabad

Guwahati

Patna

Kanpur

Lucknow

Jaipur

New Delhi

Chandigarh

Press

Mint

Issue Offices

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 BottleneckScarce Printing capacity for over a decade till 1999Pace of replacement of old currency was slow leading to deteriorating qualityInefficiencies in arranging return flow of notes as chests hardly sorted notes as fit/unfitTemporary 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 impasseCapacity to process and destroy notes in RBI needed to increase so that

Stock of soiled notes within RBI could be destroyed releasing vault spaceExpeditious withdrawal of notes from chests could be initiated


Breaking the impasseSpecial 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 stepsMobile 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 resultsClean 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 distributionThe volume should be contained within sustainable levels byShift in printing from lower to next higher denominations (a perceptible shift already visible)Coinise Rs.10 denominationTry 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


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