Demand for banknotes and coins followed the rising trend as in the past years. The Reserve Bank continued to
focus on strengthening currency exchange facility for the public at bank branches closer to them. The scheme
of incentives and penalties was revised upwards to improve customer service by banks as also by expanding the
activities covered with emphasis on technological support in the issue and distribution of currency. The Reserve
Bank constantly endeavours to maintain the confidence of the public through supply of good quality banknotes and
coins as also by enlarging the distribution network to ensure last mile connectivity.
VIII.1 Currency management being a core
function of the central banks, commands a high
degree of visibility as people often tend to judge
their efficacy from the ease of continuous access
to and quality of banknotes in their possession.
Issue of banknotes and management of currency
is one of the core functions of the Reserve Bank of
India. Section 22 of the Reserve Bank of India Act,
1934, confers upon the Reserve Bank the sole right
to issue banknotes. Rupee coins (`1, 2, 5 and 10)
and 50 paise coins, though issued by the Government
of India, are put into circulation only through the
Reserve Bank. Currency management involves
planning and designing of currency and ensuring
its integrity and availability by issuing/withdrawing
it in appropriate quantities with a view to maintaining
the standard of its quality.
BANKNOTES IN CIRCULATION
VIII.2 Demand for banknotes and coins continued
to rise in 2013-14 despite the increased use of
technology driven non-cash modes of payment
during the recent period. At the close of March
2014, the value of the banknotes in circulation stood
at `12,829 billion registering an increase of 10.1
per cent over end-March 2013. The volume of
banknotes in circulation during the same period
increased to 77 billion pieces, an increase of 5.2
per cent (Table VIII.1).
Table VIII.1: Banknotes in Circulation |
Denomination |
Volume
(million pieces) |
Value
(` billion) |
Mar 2012 |
Mar 2013 |
Mar 2014 |
Mar 2012 |
Mar 2013 |
Mar 2014 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
`2 & `5 |
11,540 |
11,624 |
11,698 |
45 |
46 |
46 |
|
(16.6) |
(15.8) |
(15.1) |
(0.4) |
(0.4) |
(0.4) |
`10 |
23,002 |
25,168 |
26,648 |
230 |
252 |
266 |
|
(33.2) |
(34.2) |
(34.5) |
(2.2) |
(2.2) |
(2.1) |
`20 |
3,510 |
3825 |
4,285 |
70 |
77 |
86 |
|
(5.1) |
(5.2) |
(5.5) |
(0.7) |
(0.6) |
(0.7) |
`50 |
3,488 |
3,461 |
3,448 |
174 |
173 |
172 |
|
(5.0) |
(4.7) |
(4.5) |
(1.6) |
(1.5) |
(1.3) |
`100 |
14,119 |
14,421 |
14,765 |
1,412 |
1,442 |
1,476 |
|
(20.3) |
(19.6) |
(19.1) |
(13.4) |
(12.4) |
(11.5) |
`500 |
10,256 |
10,719 |
11,405 |
5,128 |
5,359 |
5,702 |
|
(14.8) |
(14.6) |
(14.7) |
(48.7) |
(46.0) |
(44.4) |
`1,000 |
3,469 |
4,299 |
5,081 |
3,469 |
4,299 |
5,081 |
|
(5.0) |
(5.9) |
(6.6) |
(33.0) |
(36.9) |
(39.6) |
Total |
69,384 |
73,517 |
77,330 |
10,528 |
11,648 |
12,829 |
Note: Figures in parentheses represent the percentage share in total. |
COINS IN CIRCULATION
VIII.3 The rising trend in coins in circulation over
the past years continued during 2013-14 as well.
The coins in circulation increased by 8.2 per cent
and 13.1 per cent in terms of volume and value,
respectively (Table VIII.2).
Table VIII.2: Coins in Circulation |
Denomination |
Volume
(million pieces) |
Value
( ` billion) |
Mar 2012 |
Mar 2013 |
Mar 2014 |
Mar 2012 |
Mar 2013 |
Mar 2014 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
Small Coin |
14,785 |
14,788 |
14,788 |
7 |
7 |
7 |
|
(19.0) |
(17.4) |
(16.1) |
(5.3) |
(4.6) |
(4.1) |
`1 |
34,414 |
35,884 |
38,424 |
34 |
36 |
38 |
|
(44.1) |
(42.4) |
(41.9) |
(25.6) |
(23.5) |
(21.9) |
`2 |
18,201 |
22,113 |
24,823 |
36 |
44 |
50 |
|
(23.3) |
(26.1) |
(27.1) |
(27.1) |
(28.8) |
(28.9) |
`5 |
9,981 |
10,675 |
11,577 |
50 |
53 |
58 |
|
(12.8) |
(12.6) |
(12.7) |
(37.2) |
(34.6) |
(33.5) |
`10 |
648 |
1,267 |
2,017 |
6 |
13 |
20 |
|
(0.8) |
(1.5) |
(2.2) |
(4.8) |
(8.5) |
(11.6) |
Total |
78,029 |
84,727 |
91,629 |
133 |
153 |
173 |
Note: Figures in parentheses represent the percentage share in total. |
CURRENCY OPERATIONS
VIII.4 The Reserve Bank discharged its currency
management function during the year through a
network of 19 issue offices, a currency chest at
Kochi; 4,183 currency chests (including subtreasury
offices) and 3,967 small coin depots of
commercial, urban co-operative and regional rural
banks spread across the country (Table VIII.3).
Table VIII.3: Currency Chests and Small Coin
Depots as at end-March 2014 |
Category |
No. of Currency Chests |
No. of Small Coin Depots |
1 |
2 |
3 |
Treasuries |
11 |
0 |
State Bank of India |
2,103 |
2,036 |
SBI Associate Banks |
769 |
767 |
Nationalized Banks |
1,149 |
1,018 |
Private Sector Banks |
139 |
134 |
Co-operative Banks |
2 |
2 |
Foreign Banks |
5 |
5 |
Regional Rural Banks |
5 |
5 |
Total |
4,183 |
3,967 |
VIII.5 The Reserve Bank continues to gradually
withdraw from retail distribution of currency by
ensuring easier access to exchange facilities to the
customers through nearby bank branches. Banks
have been advised to strengthen their distribution
systems and procedures so as to cater to the
growing needs of the common man. As on May 31,
2014 there was a decrease of 80 per cent, 94 per
cent and 77 per cent in the distribution of banknotes,
coins and adjudication of mutilated banknotes
respectively from the Reserve Bank counters as
compared to the position prevailing on January 01,
2013. Simultaneously, distribution of banknotes,
coins and adjudication of mutilated banknotes from
counters of identified bank branches increased by
222 per cent, 85 per cent and 19 per cent
respectively during the same period.
VIII.6 To ensure that banks have a more
pronounced stake in the distribution of banknotes
and coins and also to facilitate their uninterrupted
supply in places other than metropolitan and urban
centres, a scheme on the lines of the lead bank
scheme (LBS) has been formulated to allot specific
areas (districts/states) to individual banks. On a
pilot basis, all regional offices of the Reserve Bank
(except Mumbai and New Delhi) have identified one
district and a bank each for implementation of LBS
for currency management. The scheme relies on
the willingness and enthusiasm of banks to be
nodal banks for currency management. The
identified lead bank is responsible for ensuring that
the genuine needs of people for clean banknotes
and coins are appropriately met through proper
coordination with currency chests and small coin
depots situated in that area. On the basis of the
experience gained, it is proposed to take the
process forward.
VIII.7 With a view to effectively meeting the
growing demand for banknotes and coins in the
country, banks were permitted to explore the
possibility of engaging the services of business
correspondents (BCs) and cash in transit (CIT)
entities for distribution of banknotes and coins.
VIII.8 As a move towards mitigation of risk arising
out of multiple series of banknotes in circulation, at
the request of the Government of India, the Reserve
Bank has set in process the withdrawal from
circulation all banknotes issued prior to 2005 as
they have fewer security features as compared to
banknotes printed after 2005. The withdrawal
exercise is in conformity with the standard
international practice of not having multiple series
of banknotes in circulation at the same time. The
Reserve Bank has been withdrawing these
banknotes in a routine manner through banks.
These banknotes can be freely exchanged at any
bank branch till January 1, 2015. The procedure to
be followed after January 1, 2015 will be
communicated by the Reserve Bank in due course.
Banks were sensitised to ensure the withdrawal in
a smooth and non-disruptive manner without
causing any inconvenience to the public. Frequently
asked questions (FAQs) with appropriate answers
were also listed on the Reserve Bank’s website.
CLEAN NOTE POLICY
Indent and supply of banknotes and coins
VIII.9 The Reserve Bank places indents for coins
and banknotes with the mints and presses
respectively on the basis of econometric models
which factor in, inter alia, real GDP growth prospects, rate of inflation and disposal rate of
denomination-wise soiled banknotes. Accordingly,
the supply of banknotes was increased from 19.1
billion pieces in 2012-13 to 20.9 billion pieces in
2013-14 (an increase of 9.5 per cent) (Table VIII.4).
The supply of coins also increased during the
period by 11.6 per cent over the previous year to
7.7 billion pieces (Table VIII.5).
Table VIII.4: Indent and Supply of Banknotes by the Presses to the Reserve Bank (April-March) |
Denomination |
Volume (million pieces) |
2011-12 |
2012-13 |
2013-14 |
2014-15 |
Indent |
Supply |
Indent |
Supply |
Indent |
Supply |
Indent |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
`5 |
0 |
2 |
- |
- |
- |
- |
- |
`10 |
5,700 |
6,252 |
12,094 |
5,506 |
12,164 |
9,467 |
8,000 |
`20 |
600 |
1,045 |
1,060 |
1,154 |
1,203 |
935 |
2,300 |
`50 |
1,200 |
949 |
1,182 |
1,626 |
994 |
1,174 |
2,100 |
`100 |
6,100 |
5,079 |
5,704 |
6,675 |
5,187 |
5,131 |
5,200 |
`500 |
2,000 |
2,330 |
3,985 |
3,002 |
4,839 |
3,393 |
5,400 |
`1,000 |
2,000 |
1,927 |
746 |
1,141 |
975 |
818 |
1,500 |
Total |
17,600 |
17,584 |
24,770 |
19,103 |
25,362 |
20,918 |
24,500 |
Table VIII.5: Indent and Supply of Coins by the
Mints to the Reserve Bank (April-March) |
Denomination |
Volume (million pieces) |
2011-12 |
2012-13 |
2013-14 |
2014-15 |
Indent |
Supply |
Indent |
Supply |
Indent |
Supply |
Indent |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
50 Paise |
70 |
107 |
50 |
6 |
50 |
40 |
40 |
`1 |
1,600 |
1,480 |
4,177 |
1,572 |
5,418 |
3,092 |
6,000 |
`2 |
2,900 |
3,343 |
2,741 |
3,742 |
3,546 |
2,424 |
4,000 |
`5 |
800 |
761 |
1,586 |
615 |
1,819 |
1,393 |
2,000 |
`10 |
1,000 |
403 |
1,000 |
943 |
1,200 |
728 |
1,460 |
Total |
6,370 |
6,094 |
9,554 |
6,878 |
12,033 |
7,677 |
13,500 |
Disposal of soiled banknotes
VIII.10 During 2013-14, around 14.2 billion pieces
of soiled banknotes were disposed of as against a
target of around 17 billion pieces. For 2014-15, a
target of around 17 billion pieces has been fixed
keeping in view the disposal capacity available and
the trend of actual disposal during the last 3 years (Table VIII.6).
Table VIII.6: Disposal of Soiled
Banknotes by the Reserve Bank
(April-March) |
Volume (million pieces) |
Denomination |
2011-12 |
2012-13 |
2013-14 |
1 |
2 |
3 |
4 |
`1,000 |
375 |
450 |
511 |
`500 |
1,994 |
2,263 |
2,405 |
`100 |
5,577 |
5,627 |
4,972 |
`50 |
1,578 |
1,357 |
1,398 |
`20 |
562 |
609 |
725 |
`10 |
3,584 |
3,752 |
4,128 |
Up to `5 |
101 |
72 |
48 |
Total |
13,772 |
14,130 |
14,187 |
COUNTERFEIT NOTES
VIII.11 To ensure proper and prompt reporting of
counterfeit notes in order to check the menace of
counterfeiting of banknotes, the Reserve Bank
continued to emphasise on installation of note
sorting machines in chests/branches and creation
of forged notes vigilance (FNV) cells in all the banks.
To instill confidence of the public in the banknotes
in circulation and with a view to controlling and
mitigating the risk of financial loss as also loss of
reputation, banks have been advised to re-align
their cash management in such a manner so as to
ensure that cash receipts in denominations of `100
and above are not put into re-circulation without the
banknotes being machine processed for authenticity.
The Reserve Bank also introduced an incentivepenalty
system relating to detection and reporting
of counterfeit notes by banks.
VIII.12 During 2013-14, 488,273 pieces of
counterfeit notes were detected of which 468,446
pieces (95.9 per cent) were detected by commercial
bank branches while 19,827 pieces (4.1 per cent)
were detected at the Reserve Bank offices
(Table VIII.7). During 2013-14, the detection of counterfeit notes of `1,000 and `100 increased
by 11.8 per cent and 9.8 per cent respectively,
whereas that of `500 denomination decreased by
10.3 per cent, as compared to the previous year
(Table VIII.8). This data, however, does not include
the counterfeit notes seized by the police and other
enforcement agencies.
Table VIII.7: Number of
Counterfeit Notes Detected (April-March) |
(No. of pieces) |
Year |
Detection at |
Total |
Reserve Bank |
Other banks |
1 |
2 |
3 |
4 |
2011-12 |
37,690 |
4,83,465 |
5,21,155 |
|
(7.2) |
(92.8) |
|
2012-13 |
29,200 |
4,69,052 |
4,98,252 |
|
(5.9) |
(94.1) |
|
2013-14 |
19,827 |
468,446 |
488,273 |
|
(4.1) |
(95.9) |
|
Note: Figures in parentheses represent the percentage share in total. |
Table VIII.8: Denomination-wise Detection of
Counterfeit Notes in the Banking System
(April-March) |
(No. of pieces) |
Denomination in ` |
2011-12 |
2012-13 |
2013-14 |
1 |
2 |
3 |
4 |
2 & 5 |
– |
2 |
1 |
10 |
126 |
321 |
157 |
20 |
216 |
221 |
87 |
50 |
12,457 |
9,759 |
6,851 |
100 |
123,398 |
108,225 |
118,873 |
500 |
301,678 |
281,265 |
252,269 |
1,000 |
83,280 |
98,459 |
110,035 |
Total pieces |
521,155 |
498,252 |
488,273 |
Notional Value in ` billion |
0.25 |
0.25 |
0.25 |
Note: Data does not include counterfeit notes seized by the police and other enforcement agencies. |
EXPENDITURE ON SECURITY PRINTING AND
DISTRIBUTION
VIII.13 With a view to obviating the need for making
repeated logistical and security arrangements for
transportation of banknotes thereby reducing the
costs, as also for ensuring speedy movement of
treasure, a scheme of direct remittance of
banknotes from note printing presses to currency
chests is being progressively pursued by the
Reserve Bank. During 2013-14 (July-June), an
expenditure of `32.1 billion was incurred on security
printing as compared to `28.7 billion during 2012-
13 (July-June).
|