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)
Reserve Bank of India


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
Reserve Bank of India
Distribution of Currency -
Dimension (value)
0
50000
100000
150000
200000
250000 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)
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
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
1,2,5
19%
20
2%
50
17%
100
29%
500
3%
1000
0%
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
1,2,5
1%
20
1% 50
15%
100
47%
500
28%
1000
3%
10
5%
1,2,5
10
20
50
100
500
1000
Reserve Bank of India
Agencies Involved
Reserve Bank of India
Flow of Notes & Coins
Presses
RBI Offices
Chest branches
Public
NOTES
4 Mints
4 mint-linked RBI Offices
Chest branches & RBI
Offices
Public
COINS
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 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: 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


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
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
0
200
400
600
800
1000
1200
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


Million pieces
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