The Reserve Bank of India (RBI) has the task of issuing, managing and distributing currency notes and coins. The Reserve Bank manages currency in India on the basis of the Reserve Bank of India Act, 1934.
(0) RBI distributes notes and coins through bank branches called chests. Currency chests and coins depots are managed by commercial, operative and regional rural banks. SBI manages the highest number of currency chests – 1965
(1) Banks officials are responsible for movement from chest to a branch. Chests distribute currencies to branches depending on specific demand. Branches demand currencies based on business volume.
(2) Banks replenish cash into ATM based on daily withdrawal propensity. Many banks outsource tasks of replenishing off site ATMS.
(3) Currency flows toPrinting presses then to RBI offices, currency chests, bank branches and public.
(4) Notes received from banks and currency chests are examined. Notes fit for circulation are reissued and the others (soiled and mutilated) are destroyed so as to maintain the quality of notes in circulation. RBI disposed 16.4 bn of soiled notes and issued fresh ones against these in 2015-16.
(5) While a soiled bank note can be exchanged for full value, a mutilated note can be exchanged for full value or half, depending on the degree of mutilation
(6) Coins do not come back from circulation, except those which are withdrawn.
Currency Management: How does the Currency Reach People?
The Reserve Bank of India(RBI) has the task of issuing, managing and distributing currency notes and coins. It is a meticulous process that involves a great deal of co-ordination and calls for a high level of security procedures. A small lax anywhere in the currency supply chain could lead to mishaps of the kind. When cash was stolen from the Chennai-bound Salem Express carrying about Rs 342 crore.
What are the Present Denominations of Bank Notes in India?
At present, notes in India are issued in the denomination of Rs 5, Rs 10, Rs 20, Rs 50, Rs 100, Rs 500 and Rs 2,000. These notes are called bank notes, as they are issued by the Reserve Bank of India. The printing of notes in the denominations of one rupee and Rs 2 has been discontinued. However, such notes issued earlier are still in circulation. The printing of notes in the denomination of Rs 5 had also been discontinued, however, it has been decided to reintroduce these notes so as to meet the gap between the demand and supply of coins in this denomination.
History of Currency Issued in India
Paper currency was first issued during British East India Company rule. The first paper notes were issued by the private banks such as Bank of Hindustan and the presidency banks during late 18th century via the Paper Currency Act of 1861, the British Government of India was conferred the monopoly to issue paper notes in India.
Where are the Indian Rupee Notes and Coins Made?
The RBI Act allows the central bank to publish notes of up to Rs 5,000 and Rs 10,000 denominations but not more. The government has to approve before those notes are introduced. The highest denomination note printed were Rs 10,000 ones, in 1938 and in 1954. These were demonetised in 1946 and again in 1978.
The amount of notes to be printed broadly depends on the demand, the economy’s growth, replacement of soiled ones, reserve stock requirements, etc. The currency paper is composed of cotton and cotton rag. The papers are now largely made in India.
The average age of the notes are usually less than a year but depend on usage. Lower the value, higher the usage. For example, a Rs 10 note could last no more than eight to 10 months, whereas a Rs 1,000 note could remain fresh for a long time, as these tend to be stored and used carefully.
Currency Chests
RBI is located only in 18 places for currency operations. RBI distributes notes and coins through bank branches called chests. To facilitate the distribution of notes and rupee coins, the Reserve Bank has authorised selected branches of banks to establish currency chests. These are actually storehouses where bank notes and rupee coins are stocked on behalf of the Reserve Bank.
In 2016, there are 4,422 currency chests. The currency chest branches are expected to distribute notes and rupee coins to other bank branches in their area of operation.Currency chests and coins depots are managed by commercial, operative and regional rural banks.
SBI manages the highest number of currency chests, 1965.
Small Coin Depots
Some bank branches are also authorised to establish small coin depots to stock small coins. There are 3,784 small coin depots spread throughout the country. The small coin depots also distribute small coins to other bank branches in their area of operation.
Movement of Currency
Banks officials are responsible for movement from chest to a branch. Chests distribute currencies to branches depending on specific demand. Branches demand currencies based on business volume. The bank branches receive the bank notes and coins from the currency chests and small coin depots for further distribution among the public.
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
Banks replenish cash into ATM based on daily withdrawal propensity. Many banks outsource tasks of replenishing off site ATMS.
Challenges of Distribution of Currency
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, cross movement of currency, security- police is preoccupied with other activities of priority, private security is unavailable and not favoured, transport through railways involves enormous coordination of logistics and privatisation of transport – introduced recently in respect of coins only.
Cost of Printing Indian Rupee Notes and Coins
According to RBI’s annual report 2016, at the end of March, there were 6.3 billion of Rs 1,000 notes, and 15.7 billion of Rs 500 notes 7% and 17.4% of those in circulation, respectively. In comparison, there were 15.8 billion of Rs 100 notes, about 17.5% of the notes in circulation (90 billion). In 2015-16, the two high-value denominations, Rs 500 and Rs 1,000, made up 24.4% of currency in circulation by volume, but a steep 86.4% by value.
