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
Patna
Bhopal

Salboni
Aham adabad Dew as
Calcutta
Calcutta Population: 1 billion
Nagpur
Mum bai Nasik Bhuaneshw ar

Mum bai
Byculla Hyderabad
North to South: 3,200 km
Hyderabad
West to East: 3,000 km
Press
Mysore Banglore Area: 3,288,000 sq. km
Mint
Chennai

Issue Offices Per-capita Income

Trivandrum

Reserve Bank of India

Distribution of Currency
-Dimension (value)
250000 1992
1993
200000 1994
1995
150000 1996
1997
100000 1998
1999
50000 2000
2001
0 2002
Rs.2,448 billion, i.e.,
US $ 49 billion currently
Reserve Bank of India
Distribution of Currency -
Dimensions (volume)
45000 1991
1992
40000
1993
35000
1994
30000 1995
25000 1996
20000 1997
15000 1998
10000 1999
2000
5000
2001
0 2002

41 billion pieces in
2002
Reserve Bank of India
Dimensions –
Enormous volume of lower denominations

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

100
19% 1,2,5
29% 10
20
50
100
10 500
50 30% 1000
20
17%
2%

Reserve Bank of India

Dimensions –
Too little value of the lower denominations

% share of denominations

1000
1,2,5 10 20
3%
1% 5% 1% 50 1,2,5
500 15%
28% 10
20
50
100
500
100 1000
47%

Reserve Bank of India

Agencies Involved
MOF
Police Railways

RBI's
RBI Presses

Govt
Presses

Mints Banks
(chests)

Reserve Bank of India

Flow of Notes & Coins Public
NOTES COINS
Chest branches 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
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 bank’s 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
RBI’s annual needs:
 Notes: about 12,000 mn pieces
 Coins: 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
Patna
Bhopal

Salboni
Aham adabad Dew as
Calcutta
Calcutta
Nagpur
Mum bai Nasik Bhuaneshw ar

Fresh Notes/Coins from

Mum bai
Byculla Hyderabad

Hyderabad
Press/Mint pass on to the
Press banks/public only through
RBI offices – hence cross-
Mysore Banglore

Mint
Issue Offices movement
Chennai

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
Special methods
Million pieces
announced
1200
enabling higher
1000 output in
processing
800
Installation of
600 processing systems
400
(BPS 1060S) in 9
Offices
200 Shredding &
0 briquetting in all
2001 2001 2001 2002 2002 offices
July Sept Nov Jan Mar

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