Recent Technological Developments in Indian Banking (Currency Management) Vepa Kamesam Deputy Governor Reserve Bank of India at Central Bank of Sri Lanka,

Recent Technological Developments in Indian Banking

(Currency Management)

Vepa Kamesam Deputy Governor

Reserve Bank of Indiaat

Central Bank of Sri Lanka, Colombo on August 20, 2003

Reserve Bank of India 2

Mint

Press

Issue Offices

Chandigarh

New Delhi Jaipur

Lucknow

Kanpur Patna

Guwahati

Ahamadabad Kolkata

Hyderabad

Banglore

Trivandrum

Chennai

Mumbai Belapur

Bhuaneshwar Nagpur

Mysore

Nasik

Dewas Salboni

Noida

Mumbai

Hyderabad

Jammu

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

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Circulation of Currency –Dimension (value)

0

50000

100000

150000

200000

250000

300000199219931994199519961997199819992000200120022003

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Circulation of Currency – Dimensions (volume)

0

5000

10000

15000

20000

25000

30000

35000

40000

450001991199219931994199519961997199819992000200120022003

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Dimensions – Enormous volume of lower denominations

% share of denominations

1,2,515%

205%50

19%

10031%

5005%

10000%

1025%

1,2,51020501005001000

As on April 2003

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Dimensions – Too little value of the lower denominations

% share of denominations

10041%

50035%

10006%

1,2,51%

201%

5013%

103%

1,2,51020501005001000As on April 2003

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Agencies Involved

RBI

Banks(chests)

MOF

Govt Presses

Mints

Police Railways

RBI's Presses

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Flow of Notes & Coins

Presses

RBI Offices

Chest branches

Public

NOTES

4 Mints

4 mint-linked RBI Offices

Chest branches & RBI Offices

Public

COINS

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Movement of Treasure

Secured Vehicles by road

Railways where connections available

Guarded by state armed police

Remittance accompanied by Bank’s Staff

Reserve Bank of India 10

Movement of Treasure – contd.

Further movement from chest to a branch done by the bank concerned Out sourcing of coin remittance through private transport operatorsDistribution of coins through Post Offices and state transport authorities in addition to banks

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How much to print & mint

Incremental needsReplacement needsReserve needsStatistical analysis and long-term forecastPrinting/minting allocated between the presses/mints and delivery schedule decided in advance

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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 4,000 mn pieces

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Challenges of Distribution

Size of the country and volume of currencyPolitical boundaries defining jurisdiction of Issue Offices lead to sub-optimal logisticsSecurity considerations

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Mint

Press

Issue Offices

Chandigarh

New Delhi Jaipur

Lucknow

Kanpur Patna

Guwahati

Ahamadabad Kolkata

Hyderabad

Banglore

Trivandrum

Chennai

Mumbai Belapur

Bhuaneshwar Nagpur

Mysore

Nasik

Dewas Salboni

Noida

Mumbai

Hyderabad

Calcutta

Bhopal

Jammu Cross-movement of Currency

Fresh Notes/Coins from Press/Mint pass on to the banks/public only through RBI offices – hence cross-movement

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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

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Problem of plenty - the present transition

Enough printing capacity since 1999Governor announces Clean Note PolicyAll RBI offices receive enough fresh note supply; Accumulation of soiled / unsorted notes at currency chests Capacity to process and destroy notes in RBI needed to be increased

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Breaking the impasse

Special methods adopted enabling higher output in processingInstallation of 48 Currency Verification and Processing Systems in 18 Offices27 Shredding & Briquetting Systems in all offices

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Mechanisation of Note Processing Operations

Currency Verification and Processing systems each with a capacity to process 50000 - 60000 thousand notes per hour

Capable of counting, authenticating, sorting into fit/unfit and online shredding of unfit notes

Disposal of soiled notes in environmental friendly manner through Shredding & Briquetting Systems

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Mechanisation of Note Processing Operations – contd.

In pursuance of Clean Note Policy Commercial Banks are in the process of installing Desk-Top Sorters at their Currency Chest branchesInstallation of Note Counting Machines Coin Dispensing Machines at all Issues Offices for better customer serviceInstallation of Coin Dispensers by Commercial banks at public places like, Railway Stations, petrol pumps

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Early results

Currency Verification and Processing Systems have stabilized in operationModernization of mints has shown resultsImport of coins and temporary printing of Rs.5 notes has improved the supply position – return flow of coins envisagedEffects of Clean Note Policy perceived

Reserve Bank of India 21

Meeting the challenge of distribution

The volume should be contained within sustainable levels by

Shift in preference from lower to higher denomination notes

Coinise Rs.10 denominationBanks have been directed to dispense with the age-old practice of stapling of notes

Thank You