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Recent Technological Developments in Indian Banking (Currency Management)

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. India – A Huge Country. Population: 1 billion North to South: 3,200 km West to East: 3,000 km

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Recent Technological Developments in Indian Banking (Currency Management)

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  1. 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

  2. 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 India

  3. Circulation of Currency –Dimension (value) Reserve Bank of India

  4. Circulation of Currency – Dimensions (volume) Reserve Bank of India

  5. Dimensions – Enormous volume of lower denominations As on April 2003 Reserve Bank of India

  6. Dimensions – Too little value of the lower denominations As on April 2003 Reserve Bank of India

  7. Agencies Involved Reserve Bank of India

  8. Flow of Notes & Coins Public NOTES COINS Chest branches Chest branches & RBI Offices Public 4 mint-linked RBI Offices RBI Offices Presses 4 Mints Reserve Bank of India

  9. 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 operators • Distribution of coins through Post Offices and state transport authorities in addition to banks Reserve Bank of India

  11. 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 India

  12. 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 India

  13. 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 India

  14. 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 India

  15. 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 India

  16. 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 India

  17. 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 India

  18. 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 Reserve Bank of India

  19. 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 India

  20. 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 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 denomination • Banks have been directed to dispense with the age-old practice of stapling of notes Reserve Bank of India

  22. Thank You

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