Recent Technological Developments in Indian Banking (Currency Management) Vepa Kamesam Deputy Governor Reserve Bank of India at Central Bank of Sri Lanka, Colombo on August 20, 2003

Reserve Bank of India2 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

Reserve Bank of India3 Circulation of Currency – Dimension (value)

Reserve Bank of India4 Circulation of Currency – Dimensions (volume)

Reserve Bank of India5 Dimensions – Enormous volume of lower denominations As on April 2003

Reserve Bank of India6 Dimensions – Too little value of the lower denominations As on April 2003

Reserve Bank of India7 Agencies Involved

Reserve Bank of India8 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 India9 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 India10 Movement of Treasure – contd. Further movement from chest to a branch done by the bank concerned Out sourcing of coin remittance through private transport operators Distribution of coins through Post Offices and state transport authorities in addition to banks

Reserve Bank of India11 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 India12 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

Reserve Bank of India13 Challenges of Distribution Size of the country and volume of currency Political boundaries defining jurisdiction of Issue Offices lead to sub-optimal logistics Security considerations

Reserve Bank of India14 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 India15 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

Reserve Bank of India16 Problem of plenty - the present transition Enough printing capacity since 1999 Governor announces Clean Note Policy All 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

Reserve Bank of India17 Breaking the impasse Special methods adopted enabling higher output in processing Installation of 48 Currency Verification and Processing Systems in 18 Offices 27 Shredding & Briquetting Systems in all offices

Reserve Bank of India18 Mechanisation of Note Processing Operations Currency Verification and Processing systems each with a capacity to process 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

Reserve Bank of India19 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 branches Installation of Note Counting Machines Coin Dispensing Machines at all Issues Offices for better customer service Installation of Coin Dispensers by Commercial banks at public places like, Railway Stations, petrol pumps

Reserve Bank of India20 Early results Currency Verification and Processing Systems have stabilized in operation Modernization of mints has shown results Import of coins and temporary printing of Rs.5 notes has improved the supply position – return flow of coins envisaged Effects of Clean Note Policy perceived

Reserve Bank of India21 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 denomination Banks have been directed to dispense with the age-old practice of stapling of notes

Thank You