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

Hyderabad

West to East: 3,000 km

Hyderabad

Press
Mysore

Banglore

Chennai

North to South: 3,200 km

Mint
Issue Offices

Area: 3,288,000 sq. km

Per-capita Income

Trivandrum

Reserve Bank of Indi

Distribution of Currency
-Dimension (value)
250000
200000
150000
100000
50000
0

Rs.2,448 billion, i.e.,

US $ 49 billion currently
Reserve Bank of Indi

1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002

Distribution of Currency Dimensions (volume)

45000
40000
35000
30000
25000
20000
15000
10000
5000
0

41 billion pieces in
2002
Reserve Bank of Indi

1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002

Dimensions
Enormous volume of lower denominations
% share of denominations
500
3%

1000
0%
1,2,5
19%

100
29%

50
17%

20
2%

Reserve Bank of Indi

10
30%

1,2,5
10
20
50
100
500
1000

Dimensions
Too little value of the lower denominations
% share of denominations
1000
3%
500
28%

1,2,5 10
1% 5%

20
1%

50
15%

100
47%

Reserve Bank of Indi

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 Indi

Flow of Notes & Coins

NOTES
Chest
branches

RBI
Offices

Public

COINS
Chest branches &
RBI Offices
Publi
c

4 mint-linked RBI
Offices

Presses

4 Mints
Reserve Bank of Indi

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 Indi

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 Indi

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 Indi

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 Indi

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 Indi

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:
Coins:

about 12,000 mn pieces

about 5,000 mn pieces

Reserve Bank of Indi

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 Indi

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

Trivandrum

Fresh Notes/Coins from

Press/Mint pass on to
Press
the banks/public only
through RBI offices
Mint
Issue Offices hence crossmovement
Reserve Bank of Indi

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 Indi

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 Indi

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 Indi

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 Indi

Breaking the impasse

Million pieces
1200
1000
800
600
400
200
0

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

Reserve Bank of Indi

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 Indi

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 Indi

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 Indi

Thank you

Reserve Bank of India