Currency Distribution

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

Patna Salboni

Dew as

Calcutta Calcutta

Population: 1 billion

Nagpur Mum bai

Nasik

Bhuaneshw ar

Mum bai Byculla

North to South: 3,200 km

Hyderabad

West to East: 3,000 km

Hyderabad

Press Mysore

Banglore

Chennai

Mint Issue Offices

Trivandrum

Reserve Bank of India

Area: 3,288,000 sq. km Per-capita Income

Distribution of Currency -Dimension (value) 25 00 00

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

20 00 00 15 00 00 10 00 00 500 00 0

Rs.2,448 billion, i.e., US $ 49 billion currently Reserve Bank of India

Distribution of Currency Dimensions (volume) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

450 00 400 00 350 00 300 00 250 00 200 00 150 00 100 00 50 00 0

41 billion pieces in 2002

Reserve Bank of India

Dimensions –

Enormous volume of lower denominations % sh are of den om in atio ns 500 3%

1000 0% 1,2,5 19%

100 29%

50 17%

20 2%

Reserve Bank of India

10 30%

1, 2, 5 10 20 50 100 500 100 0

Dimensions –

Too little value of the lower denominations % sha re of deno m ina tions 1000 3% 500 28%

1,2,5 10 1% 5%

20 1%

100 47%

Reserve Bank of India

50 15%

1,2,5 10 20 50 100 500 1000

Agencies Involved MOF Railways

Police

RBI

RBI's Presses

Govt Presses

Mints

Banks (chests)

Reserve Bank of India

Flow of Notes & Coins NOTES Chest branches

Public

COINS Chest branches & RBI Offices Public

RBI Offices

4 mint-linked RBI Offices

Presses

4 Mints Reserve Bank of India

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

More on Currency Chest Mee ts curren cy req ui reme nt of pu bli c Wi th draws unfit n ote s Excha ng e f aci li ty from one de no min at ion to an other Pa ymen t req uir eme nt of the Gover nment Excha ng e o f mu til at ed notes Avo id s frequ en t mo ve men t of cas h Ch est bran ch ope ra tes wi th minBank imu m cash ba la nce Reserve of India

Currency Chest Mechanism Net d ep os it /w ithd raw al of notes and coin s at th e ch est i s rep orte d on d ai ly basis to pare nt Iss ue Off ice Overall dep os it or wit hd raw al lead s to credi t or debit of bank’ s accou nt in RBI Net wit hd raw al from ches ts means ex pans ion o f curr ency and depos its mea ns con tracti on Notes in circu latio n being th e liab il it y of RB I, it adjus ts its as set-li abili ty pos ition cen tra lly for such exp ansion or contr acti on

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 RBI’s 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

Patna Salboni

Dew as

Calcutta Calcutta Nagpur Mum bai

Nasik

Bhuaneshw ar

Mum bai Byculla

Hyderabad

Hyderabad

Mysore

Banglore

Chennai

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

Trivandrum

Reserve Bank of India

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

Reserve Bank of India

Speci al met hods an nounce d en ab lin g hi ghe r outpu t in pr oce ssi ng In st al lat io n of pr oce ssi ng sys te ms (BPS 1060 S) in 9 Offices Shred din g & br iqu ett ing in al l offices

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