The focus of currency management during the year continued on making available adequate quantity of clean notes in circulation, especially in the backdrop of the second wave of the COVID-19 pandemic. The Reserve Bank made an attempt to gauge trends and preferences in public usage of banknotes with a view to optimise the currency management operations.

VIII.1 In the wake of the second wave of COVID-19 pandemic, which induced renewed restrictions on movement in various parts of the country, the efforts of the Reserve Bank remained focused on ensuring adequate supply of clean banknotes in the economy while accelerating the pace of disposal of soiled notes, a process that was severely disrupted in the previous year. Simultaneously, the Reserve Bank also attempted to gather meaningful insights about the pattern of usage of cash by the public given the rise in digital payments in the recent past.

VIII.2 Against this backdrop, the rest of the chapter is organised into five sections. The next section presents the important developments in currency in circulation during the year. Section 3 covers the implementation status of the agenda for 2021-22 and section 4 presents the developments with regard to Bharatiya Reserve Bank Note Mudran Private Ltd. (BRBNMPL), a wholly-owned subsidiary of the Reserve Bank. Section 5 sets out the agenda for 2022-23, while concluding observations are set out in the last section.

2. Developments in Currency in Circulation

VIII.3 Currency in circulation (CiC) includes banknotes and coins. Presently, the Reserve Bank issues banknotes in denominations of ₹2, ₹5, ₹10, ₹20, ₹50, ₹100, ₹200, ₹500 and ₹2000. Coins in circulation comprise 50 paise and ₹1, ₹2, ₹5, ₹10 and ₹20 denominations.

Banknotes

VIII.4 The value and volume of banknotes in circulation increased by 9.9 per cent and 5.0 per cent, respectively, during 2021-22 as compared with 16.8 per cent and 7.2 per cent, respectively, during 2020-21 (Table VIII.1). In value terms, the share of ₹500 and ₹2000 banknotes together accounted for 87.1 per cent of the total value of banknotes in circulation as on March 31, 2022, as against 85.7 per cent as on March 31, 2021. In volume terms, ₹500 denomination constituted the highest share at 34.9 per cent, followed by ₹10 denomination banknotes, which constituted 21.3 per cent of the total banknotes in circulation as on March 31, 2022.

Coins

VIII.5 The total value of coins in circulation increased by 4.1 per cent in 2021-22, while the total volume increased by 1.3 per cent during the same period (Table VIII.2). As on March 31, 2022, coins of ₹1, ₹2 and ₹5 together constituted 83.5 per cent of the total volume of coins in circulation, while in value terms, these denominations accounted for 75.8 per cent.

Currency Management Infrastructure

VIII.6 The functions relating to the issuance of currency (both banknotes and coins) and their management are performed by the Reserve Bank through its issue offices, currency chests and small coin depots spread across the country.

As on March 31, 2022, the State Bank of India accounted for the highest share (53.6 per cent) of currency chests (Table VIII.3).

Indent and Supply of Currency

VIII.7 The indent of banknotes for 2021-22 was marginally lower by 1.8 per cent than that of a year ago (Table VIII.4). The supply of banknotes was also marginally lower by 0.4 per cent during 2021-22 than the previous year.

VIII.8 During 2021-22, the indent and supply for coins was lower by around 73.3 per cent and 73.0 per cent, respectively, as compared with last year due to accumulated stock and lower demand in last few years (Table VIII.5).

Disposal of Soiled Banknotes

VIII.9 The disposal of soiled banknotes increased by 88.4 per cent to 1,878.01 crore pieces during 2021-22 from 997.02 crore pieces in the previous year (Table VIII.6).

Counterfeit Notes

VIII.10 During 2021-22, out of the total Fake Indian Currency Notes (FICNs) detected in the banking sector, 6.9 per cent were detected at the Reserve Bank and 93.1 per cent at other banks (Table VIII.7).

VIII.11 Compared to the previous year, there was an increase of 16.4 per cent, 16.5 per cent, 11.7 per cent, 101.9 per cent and 54.6 per cent in the counterfeit notes detected in the denominations of ₹10, ₹20, ₹200, ₹500 (new design) and ₹2000, respectively. The counterfeit notes detected in the denominations of ₹50 and ₹100 declined by 28.7 per cent and 16.7 per cent, respectively (Table VIII.8).

Expenditure on Security Printing

VIII.12 The total expenditure incurred on security printing during April 1, 2021 to March 31, 2022 was ₹4,984.8 crore as against ₹4,012.1 crore in the previous year (July 1, 2020 to March 31, 2021).

3. Agenda for 2021-22

VIII.13 Last year, the Department had set out the following goals:

• Augmentation of disposal of soiled notes (Paragraph VIII.14);

• Procurement of new Shredding and Briquetting Systems (SBS) (Utkarsh) [Paragraph VIII.15]; and

• Establishment of a state-of-the-art facility for conducting cutting edge research to test the robustness of security features of banknotes and introduction of new security features (Utkarsh) [Paragraph VIII.15].

Implementation Status

Augmentation of Disposal of Soiled Banknotes

VIII.14 The disposal of soiled banknotes was severely affected during the second and third waves of COVID-19 pandemic. However, as a result of concerted efforts, the disposal of soiled banknotes improved significantly as alluded to earlier under paragraph VIII.9.

Other Goals

VIII.15 The remaining goals set for 2021-22 are under various stages of implementation and have thus been carried forward to the agenda for 2022- 23.

Major Activities

Microsite for Banknotes

VIII.16 A new microsite for banknotes is being launched by the Reserve Bank, hosting information on security features and exchange facility for banknotes. The hallmark of the microsite is that the information will be disseminated not only through multiple modes such as 360-degree views of the design and security features of banknotes, explanatory videos and animations, but also through interactive games.

Awareness Campaign on Exchange of Banknotes

VIII.17 With a view to enhance customer service, the Reserve Bank embarked on an awareness campaign exclusively on exchange facilities for banknotes. The media mix of the campaign included TV commercials and print advertisements in newspapers. The campaign which was conducted from March 16 to 31, 2022 is expected to provide further impetus to the exchange facility for banknotes.

Banknote Survey of Consumers

VIII.18 The Department launched a banknote survey of consumers with the objective of (i) assessing demand for cash as well as denomination preferences at the consumer level; (ii) measuring awareness of consumers about various security features of the banknotes; and (iii) gauging the level of satisfaction with banknotes and coins among the general public as well as visually impaired persons (Box VIII.1).

Procurement of New Security Features for Indian Banknotes

VIII.19 The Reserve Bank is actively involved in taking the process of introduction of new security features for banknotes forward.

Strengthening Currency Management Operations

VIII.20 The Reserve Bank continued to focus on the enhancement of its production and processing capabilities towards strengthening the currency management operations in the economy.

Scheme of Penalty for Non-replenishment of ATMs

VIII.21 A scheme of penalty for non-replenishment of ATMs was introduced for banks/White Label ATM Operators (WLAOs) to ensure that sufficient cash is made available to the public through ATMs.

Increasing Incentives for Distribution of Coins

VIII.22 Currency Distribution and Exchange Scheme (CDES) for banks was reviewed wherein the incentive for distribution of coins was increased from ₹25 to ₹65 per bag. An additional incentive of ₹10 per bag will be payable for coin distribution in rural and semi-urban areas. While the need of engaging business correspondents (BCs) and cash in transit (CIT) companies by banks for distribution of coins was re-emphasised, banks were also advised to provide coins to bulk customers which was not permitted earlier.

4. Bharatiya Reserve Bank Note Mudran Private Ltd. (BRBNMPL)

VIII.23 BRBNMPL is a wholly-owned subsidiary of the Reserve Bank, which is playing a crucial role in designing, printing and supply of banknotes. In the COVID-19 pandemic-induced environment, BRBNMPL achieved production of 13,350 million pieces of banknotes in 2021-22. The two-fold increase in direct remittances by BRBNMPL to currency chests aided the unfettered availability of banknotes during the pandemic. Colour Shift Intaglio Ink (CSII), a security feature used in the Indian banknotes that was imported earlier, is now being indigenously manufactured at Varnika, the Ink Manufacturing Unit at BRBNMPL, Mysuru, meeting the entire requirement of both BRBNMPL and SPMCIL. This has resulted in significant reduction in import dependency for banknote production as also saving of foreign exchange. During the year, the Governor, Reserve Bank dedicated the Ink Manufacturing Unit (Varnika) of BRBNMPL, Mysuru to the nation.

5. Agenda for 2022-23

VIII.24 During the year, the Department will focus on the following:

• Procurement of new Shredding and Briquetting Systems (SBS) [Utkarsh];

• Establishment of a state-of-the-art facility for conducting cutting edge research to test the robustness of security features of banknotes and introduction of new security features (Utkarsh);

• Study on automation and logistics in currency management;

• Mobile Aided Note Identifier (MANI) App for the visually impaired persons - introduction of 11 regional languages in the App in addition to Hindi and English already available; and

• Survey on the usage of cash, coins and digital mode for payments.

6. Conclusion

VIII.25 In sum, during 2021-22, the Reserve Bank focused on augmenting disposal of soiled notes, enhancing public awareness, understanding public demand and expectations from banknotes, making available adequate quantity of clean notes and maintaining sufficient buffer stock to meet any contingency requirements on account of COVID-19 pandemic. Going ahead, the Reserve Bank’s endeavour would be to further modernise the processing of banknotes, rationalise currency management processes, promote analytical research for strengthening the integrity of banknotes, frame a strategy for complete indigenisation of raw materials for banknote production, increase public awareness through technological aids and study the public usage of cash, coins and digital mode through a pan-India survey.