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)
25 00 00 1992
1993
20 00 00 1994
1995
15 00 00 1996
1997
10 00 00 1998
1999
500 00 2000
2001
0 2002
Rs.2,448 billion, i.e.,
US $ 49 billion currently
Reserve Bank of India
Distribution of Currency -
Dimensions (volume)
450 00 1991
1992
400 00
1993
350 00
1994
300 00 1995
250 00 1996
200 00 1997
150 00 1998
100 00 1999
2000
50 00
2001
0 2002

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

% sh are of den om in atio ns

1000
0%
500
3% 1,2,5

100
19% 1, 2, 5
29% 10
20
50
100
10 500
50 30% 100 0
20
17%
2%

Reserve Bank of India

Dimensions –
Too little value of the lower denominations

% sha re of deno m ina tions

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
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
Reserve imu m cash ba la nce
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: 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
Speci al met hods
Million pieces
an nounce d
1200
en ab lin g hi ghe r
1000 outpu t in
800
pr oce ssi ng
In st al lat io n of
600 pr oce ssi ng
400 sys te ms (BPS
1060 S) in 9
200
Offices
0 Shred din g &
2001 2001 2001 2002 2002
br iqu ett ing in al l
July Sept Nov Jan Mar
offices
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