Currency Management 2023-2024 PDF

CURRENCY MANAGEMENT VIII CURRENCY MANAGEMENT During the year, the Reserve Bank remained focused on its endeavour to provide adequate quantity of clean banknotes in circulation. In pursuance of this, the process of withdrawal of ₹2...

CURRENCY MANAGEMENT VIII CURRENCY MANAGEMENT During the year, the Reserve Bank remained focused on its endeavour to provide adequate quantity of clean banknotes in circulation. In pursuance of this, the process of withdrawal of ₹2000 denomination banknotes was also undertaken. A survey was conducted to have better insights on the usage and preference for banknotes, coins and digital modes of payments in the country. An exercise was initiated to revamp the extant currency management architecture in the country to benefit from state-of-the-art technologies and enhance its operational efficiency. VIII.1 During 2023-24, the Reserve Bank Mudran Private Ltd. (BRBNMPL), a wholly- sustained its efforts to ensure adequate supply owned subsidiary of the Reserve Bank, are of clean banknotes and coins in the economy to given in section 4. The Department’s agenda for meet the demand for cash from the public. The 2024-25 is provided in section 5 with concluding withdrawal of soiled banknotes and momentum observations in section 6. of their disposal also continued. For better 2. Agenda for 2023-24 assessment of the requirement for banknotes VIII.3 The Department had set out the following going forward, an analysis was undertaken to goals for 2023-24: glean insights from the trends in household cash usage for transactional purposes. The Reserve Preparation of an implementation Bank embarked upon an exercise to modernise programme based on recommendations of the report on currency network design; the currency management infrastructure in the mechanisation and automation; and country. The withdrawal of ₹2000 denomination scheduling and inventory management banknotes, which were introduced in November for achieving higher efficiency in currency 2016 to expeditiously meet the currency management (Paragraph VIII.4); requirement of the economy post withdrawal of legal tender status of ₹500 and ₹1000 banknotes Establishment of a state-of-the-art facility from circulation, was undertaken. for conducting cutting edge research on banknotes (Utkarsh 2.0) [Paragraph VIII.2 Against this backdrop, the rest of the VIII.5]; chapter is organised into five sections. Section 2 covers the implementation status of the agenda Conducting survey on quality of notes for 2023-24, followed by important developments in circulation (Utkarsh 2.0) [Paragraph in currency in circulation along with other activities VIII.6]; during the year in section 3. The developments Developing cash usage indicators with regard to Bharatiya Reserve Bank Note (Utkarsh 2.0) [Paragraph VIII.7]; 153  ANNUAL REPORT 2023-24 Implementation of recommendations VIII.8 The recommendations of the Committee of the Committee for review of extant for review of extant mechanism of cash mechanism of cash dispensation and dispensation and related issues in ATM related issues in automated teller machine ecosystem are currently under various stages of (ATM) ecosystem (Paragraph VIII.8); and implementation. Institutionalisation of the process of VIII.9 The institutionalisation of the process of certification of note sorting machines certification of note sorting machines (NSMs) (NSMs) in alignment with the prescribed sorting standards (Utkarsh 2.0) in alignment with the prescribed sorting [Paragraph VIII.9]. standards was undertaken by the Bureau of Indian Standards (BIS) at the behest of the Implementation Status Reserve Bank, wherein a panel comprising VIII.4 An action plan has been formulated industry experts, standard setters from BIS, RBI for redesigning and modernising the currency and banks was constituted, which finalised the management architecture through use of network technical standards for NSMs. The ‘Note Sorting optimisation, technological solutions, automation Machines (NSMs) Specification IS 18663 : 2024’ and business process re-engineering. The project involving various stakeholders would be was published in ‘The Gazette of India’ on March implemented in phases. 19, 2024. These standards shall be utilised for certification of NSMs used by banks across the VIII.5 An adversarial analysis1 laboratory has been operationalised at the Mysuru campus of country and will bring in uniformity in note sorting BRBNMPL for conducting cutting edge research across the banks. on banknotes. 3. Developments in Currency in Circulation VIII.6 Surveys on public perception of the VIII.10 Currency in circulation includes quality of banknotes were carried out in various banknotes, central bank digital currency (CBDC) regions, which helped in understanding the and coins. Presently, banknotes in circulation public requirement and accordingly, necessary comprise denominations of ₹2, ₹5, ₹10, ₹20, ₹50, policy and operational measures were taken. ₹100, ₹200, ₹500 and ₹2000. The Reserve Bank VIII.7 An analysis to understand the recent is no longer printing banknotes of denominations trends in household cash usage for transactional of ₹2, ₹5 and ₹2000. Coins in circulation purposes vis-à-vis the growth in retail digital comprise 50 paise and ₹1, ₹2, ₹5, ₹10 and ₹20 payments was carried out in the Department to help in better estimation of demand for denominations. The Reserve Bank has been banknotes, going forward. The methodology publishing denomination-wise data on currency would be updated based on incoming data to in circulation on a weekly basis from the week make the cash usage indicators more robust. ended December 29, 2023. 1 Conducted to assess counterfeiting risks through in-house simulation of banknote features by trained experts/technicians using commercially available materials and equipment. 154  CURRENCY MANAGEMENT VIII.11 In terms of Section 22A of the denomination from circulation. In volume terms, RBI Act, 1934, denominations as set out ₹500 denomination constituted the highest share in Section 24 of the Act, do not apply to of the total banknotes in circulation, followed by banknotes in digital form. Accordingly, the ₹10 denomination banknotes as on March 31, live-pilot of Digital Rupee-Retail (e₹-R) 2024. has been launched in denominations of 50 Withdrawal of ₹2000 Denomination Banknotes paise, ₹1, ₹2, ₹5, ₹10, ₹20, ₹50, ₹100, ₹200, ₹500 and ₹2000, while e₹-Wholesale (e₹-W) from Circulation does not have any specific denomination. VIII.13 The ₹2000 denomination banknote was Banknotes introduced in November 2016 under Section 24(1) of the RBI Act, primarily to meet the currency VIII.12 The value and volume of banknotes requirement of the economy in an expeditious in circulation increased by 3.9 per cent and manner after the withdrawal of legal tender status 7.8 per cent, respectively, during 2023-24 as compared with an increase of 7.8 per cent and of ₹500 and ₹1000 banknotes in circulation at 4.4 per cent, respectively, during the previous that time. The objective of introducing ₹2000 year (Table VIII.1). During 2023-24, the share banknotes was met once banknotes in other of ₹500 banknotes increased in value terms denominations became available in adequate whereas that of ₹2000 banknotes declined quantities. Therefore, printing of ₹2000 banknotes sharply reflecting the withdrawal of the latter was stopped in 2018-19. Table VIII.1: Banknotes in Circulation (end-March) Denomination (₹) Volume (pieces in lakh) Value (₹ crore) 2022 2023 2024 2022 2023 2024 1 2 3 4 5 6 7 2 and 5 1,11,261 1,10,843 1,10,547 4,284 4,263 4,249 (8.5) (8.1) (7.5) (0.1) (0.1) (0.1) 10 2,78,046 2,62,123 2,49,506 27,805 26,212 24,951 (21.3) (19.2) (17.0) (0.9) (0.8) (0.7) 20 1,10,129 1,25,802 1,33,973 22,026 25,160 26,795 (8.4) (9.2) (9.1) (0.7) (0.8) (0.8) 50 87,141 85,716 89,783 43,571 42,858 44,892 (6.7) (6.3) (6.1) (1.4) (1.3) (1.3) 100 1,81,420 1,80,584 2,05,656 1,81,421 1,80,584 2,05,656 (13.9) (13.3) (14.0) (5.8) (5.4) (5.9) 200 60,441 62,620 77,108 1,20,881 1,25,241 1,54,215 (4.6) (4.6) (5.2) (3.9) (3.7) (4.4) 500 4,55,468 5,16,338 6,01,770 22,77,340 25,81,690 30,08,847 (34.9) (37.9) (41.0) (73.3) (77.1) (86.5) 2000 21,420 18,111 410 4,28,394 3,62,220 8,202 (1.6) (1.3) (0.03) (13.8) (10.8) (0.2) Total 13,05,326 13,62,137 14,68,754 31,05,721 33,48,228 34,77,805 Note: 1. Figures in parentheses represent the percentage share in total volume/value. 2. Figures may not add up to total due to rounding-off of the numbers. Source: RBI. 155  ANNUAL REPORT 2023-24 VIII.14 About 89 per cent of the ₹2000 of ₹2000 banknotes in circulation as on May denomination banknotes were at the end of their 19, 2023 when the withdrawal was announced, estimated life span of 4-5 years and were not 97.7 per cent had returned to the banking system commonly used for transactions. It was, therefore, up to March 31, 2024. decided to withdraw the ₹2000 denomination Coins banknotes from circulation, while continuing their VIII.15 The total value as well as volume of legal tender status. A press release was issued on coins in circulation increased in 2023-24. As on May 19, 2023 advising the public to deposit and/ March 31, 2024, coins of ₹1, ₹2 and ₹5 together or exchange ₹2000 banknotes at bank branches constituted 82.5 per cent of the total volume and at the 19 issue offices2 of the Reserve Bank of coins in circulation, while in value terms, till September 30, 2023, which was later extended these denominations accounted for 68 per cent up to October 7, 2023. From October 9, 2023, the (Table VIII.2). facility for deposit and/or exchange is available at the Reserve Bank issue offices. Further, ₹2000 e₹ in Circulation banknotes can be sent through India Post to VIII.16 The live pilot of e₹-R, launched on the Reserve Bank issue offices in lieu of credit December 1, 2022, gained momentum during the in their bank accounts. Of the ₹3.56 lakh crore year (Table VIII.3). Table VIII.2: Coins in Circulation (end-March) Denomination (₹) Volume (pieces in lakh) Value (₹ crore) 2022 2023 2024 2022 2023 2024 1 2 3 4 5 6 7 Small coins 1,47,880 1,47,880 1,47,880 700 700 700 (11.9) (11.6) (11.2) (2.5) (2.3) (2.1) 1 5,15,879 5,21,618 5,29,934 5,159 5,216 5,299 (41.4) (40.8) (40.0) (18.4) (17.2) (15.9) 2 3,40,792 3,47,277 3,55,929 6,816 6,946 7,119 (27.3) (27.1) (26.9) (24.4) (23.0) (21.3) 5 1,84,331 1,94,155 2,05,471 9,217 9,708 10,274 (14.8) (15.2) (15.5) (33.0) (32.1) (30.8) 10 54,044 59,764 68,637 5,404 5,976 6,864 (4.3) (4.7) (5.2) (19.3) (19.8) (20.6) 20 3,372 8,483 15,667 674 1,697 3,133 (0.3) (0.7) (1.2) (2.4) (5.6) (9.4) Total 12,46,298 12,79,178 13,23,518 27,970 30,242 33,389 Note: 1. Figures in parentheses represent the percentage share in total volume/value. 2. Figures may not add up to total due to rounding-off of the numbers. Source: RBI. 2 Ahmedabad, Bengaluru, Belapur, Bhopal, Bhubaneswar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthapuram. 156  CURRENCY MANAGEMENT Table VIII.3: e₹ in Circulation (end-March) Table VIII.4: Currency Chests and Small Coin e₹ Denomination Volume Value Depots (end-March 2024) (₹) (pieces in lakh) (₹ crore) Category Number of Number of 2023 2024 2023 2024 Currency Small Coin 1 2 3 4 5 6 Chests Depots e₹-R 0.5 2.7 18.4 0.01 0.09 1 2 3 (16.1) (7.7) (0.2) (0.04) State Bank of India 1,467 1,339 1 3.8 37.3 0.04 0.37 Nationalised Banks 1,086 911 (22.2) (15.7) (0.7) (0.2) Private Sector Banks 224 194 2 2.8 27.1 0.06 0.54 Cooperative Banks 5 5 (16.2) (11.4) (1.0) (0.2) Foreign Banks 4 3 5 2.4 27.3 0.12 1.37 Regional Rural Banks 7 7 (13.9) (11.5) (2.1) (0.6) Reserve Bank of India 1 1 10 1.5 21.4 0.15 2.14 Total 2,794 2,460 (8.8) (9.0) (2.6) (0.9) Source: RBI. 20 1.2 19.7 0.23 3.94 (6.8) (8.3) (4.1) (1.7) 50 0.8 17.0 0.39 8.49 Indent and Supply of Currency (4.6) (7.1) (6.9) (3.6) 100 0.8 20.7 0.83 20.73 VIII.18 The volume of indent of banknotes and (4.8) (8.7) (14.5) (8.9) 200 0.6 16.0 1.16 32.01 coins for 2023-24 was higher than 2022-23 (3.4) (6.7) (20.4) (13.7) (Tables VIII.5 and VIII.6). The supply of banknotes 500 0.5 32.9 2.71 164.36 and coins was also higher during 2023-24 as (3.2) (13.8) (47.5) (70.2) 2000 - - - - compared with the previous year. Total e₹-R 17.1 237.8 5.70 234.04 Total e₹-W … … 10.69 0.08 Table VIII.5: Indent and Supply of Banknotes Total e₹ 16.39 234.12 by BRBNMPL and SPMCIL (April-March) -: Nil. …: Not applicable. (Pieces in lakh) Note: 1. Figures in parentheses represent the percentage share in total volume/value. Denomi- 2021-22 2022-23 2023-24 2. Figures may not add up to total due to rounding-off of nation the numbers. (₹) Indent Supply Indent Supply Indent Supply Source: RBI. 1 2 3 4 5 6 7 5 - - - - - - 10 7,500 7,510 6,000 6,000 8,000 8,000 Currency Management Infrastructure 20 20,000 20,000 20,000 19,999 20,000 20,000 50 15,000 15,000 20,000 20,000 25,000 25,000 VIII.17 The functions relating to issuance of 100 40,000 40,002 60,000 60,000 70,000 70,000 200 12,000 11,991 20,000 20,000 30,000 30,000 currency (i.e., banknotes and coins) and their 500 1,28,000 1,28,003 1,00,000 1,00,004 90,000 90,000 management are performed by the Reserve 2000 - - - - - - Bank through its 19 issue offices, 2,794 currency Total 2,22,500 2,22,505 2,26,000 2,26,002 2,43,000 2,43,000 chests and 2,460 small coin depots spread -: Nil. BRBNMPL: Bharatiya Reserve Bank Note Mudran Private Ltd. across the country. As on March 31, 2024, State SPMCIL: Security Printing and Minting Corporation of India Ltd. Note: Figures may not add up to total due to rounding-off of the Bank of India accounted for the highest share of numbers. Source: RBI. currency chests (Table VIII.4). 157  ANNUAL REPORT 2023-24 Table VIII.6: Indent and Supply of Coins by Mints (April-March) (Pieces in lakh) Denomination (₹) 2021-22 2022-23 2023-24 Indent Supply Indent Supply Indent Supply 1 2 3 4 5 6 7 1 - - 1,000 1,000 3,000 3,058 2 2,000 2,000 3,000 3,000 3,000 3,000 5 2,000 2,000 3,000 3,000 3,000 3,000 10 2,000 2,000 1,000 1,002 1,000 1,000 20 2,000 2,000 2,000 2,000 2,000 1,999 Total 8,000 8,000 10,000 10,002 12,000 12,056 -: Nil. Note: Figures may not add up to total due to rounding-off of the numbers. Source: RBI. Disposal of Soiled Banknotes Counterfeit Notes VIII.19 Details regarding the disposal of VIII.20 During 2023-24, out of the total Fake soiled banknotes during 2023-24 are set out Indian Currency Notes (FICNs) detected in the in Table VIII.7. The Reserve Bank has been banking sector, 7.9 per cent were detected at publishing denomination wise data on disposal the Reserve Bank (Table VIII.8). of soiled notes on monthly basis from December VIII.21 The counterfeit notes detected in 2023. denominations of ₹10, ₹20, ₹50, ₹100 and ₹500 declined during 2023-24, while those in ₹200 Table VIII.7: Disposal of Soiled Banknotes (April-March) (Pieces in lakh) Table VIII.8: Number of Counterfeit Notes Denomination (₹) 2021-22 2022-23 2023-24 Detected (April-March) (Number of pieces) 1 2 3 4 2000 3,847 4,824 18,458 Year Detection at Detection at Total the Reserve Other Banks 1000 - - 4 Bank 500 22,082 51,092 63,320 1 2 3 4 200 6,167 13,062 13,594 2021-22 15,878 2,15,093 2,30,971 100 59,203 58,282 60,217 (6.9) (93.1) (100.0) 50 27,696 34,219 19,095 2022-23 10,465 2,15,304 2,25,769 20 20,771 21,393 13,971 (4.6) (95.4) (100.0) 10 46,778 45,077 23,461 2023-24 17,613 2,05,026 2,22,639 Up to 5 1,257 1,315 370 (7.9) (92.1) (100.0) Total 1,87,801 2,29,264 2,12,493 Note: 1. Figures in parentheses represent the percentage share -: Not applicable. in total. Note: Figures may not add up to total due to rounding-off of the 2. Does not include counterfeit notes seized by the police numbers. and other enforcement agencies. Source: RBI. Source: RBI. 158  CURRENCY MANAGEMENT denomination increased marginally as compared Table VIII.9: Denomination-wise Counterfeit with the previous year. On account of the ongoing Notes Detected in the Banking System withdrawal of ₹2000 banknotes from circulation (April-March) (Number of pieces) and processing of these notes in large numbers, Denomination (₹) 2021-22 2022-23 2023-24 counterfeit notes detected in this denomination 1 2 3 4 increased during the year (Table VIII.9). 2 and 5 1 3 1 Expenditure on Security Printing 10 354 313 235 20 311 337 297 VIII.22 The expenditure incurred on security 50 17,696 17,755 15,366 printing during 2023-24 was ₹5,101.4 crore as 100 92,237 78,699 66,310 against ₹4,682.8 crore in the previous year. 200 27,074 27,258 28,672 500 (Specified Banknotes) 14 6 11 Other Activities 500 79,669 91,110 85,711 1000 (Specified Banknotes) 11 482 1 Survey on the Usage of Coins and Banknotes 2000 13,604 9,806 26,035 VIII.23 In the evolving scenario of growth in retail Total 2,30,971 2,25,769 2,22,639 digital payments coupled with continued increase Source: RBI. in demand for cash, a survey was conducted in 2023 to understand the usage and preference to assess the shortage/surfeit of cash and coins for cash, coins, factors influencing demand and (Box VIII.1). Box VIII.1 Survey on the Usage of Coins and Banknotes The survey covered a total of 22,725 respondents, More than 70 per cent of the respondents cited better comprising 11,474 consumers and 11,251 merchants (viz., availability of banknotes of ₹100 and above vis-à-vis small manufacturers, retail traders and service providers) banknotes of ₹50 and below. Around 80 per cent of the spread across 20 states/union territories. Around 63 per respondents did not encounter scarcity of banknotes in the cent of the total respondents were from rural and semi- last one year. urban areas, 19 per cent from urban areas and 18 per cent With increasing ticket size of transactions, the preference from metropolitan centres. among consumer respondents has shifted towards Major Findings digital payments. Compared to the all-India average, the Consumers penetration of digital payment usage was less in rural areas due to lower familiarity with digital payment modes, besides According to the survey, 56.7 per cent of the consumer safety concerns. This disparity was more pronounced respondents required coins predominantly for tendering among the people of age 60 years and above. change while shopping, travelling and for making donations. The need for ₹5 coins was the highest, followed by ₹2 and Merchants ₹10. A majority of the respondents reported that they had not Around two-thirds of the merchant respondents utilised coins faced any shortage of coins in the last one year. for business transactions, travelling and donations, with its With regard to banknotes, more than 80 per cent of the usage being higher among retail traders followed by service consumer respondents required banknotes for shopping, providers. The requirement for ₹5 coins was the highest travelling, making utility/fee payments and for emergencies. followed by ₹2 coins and ₹10 coins. Around 25 per cent of (Contd.) 159  ANNUAL REPORT 2023-24 the respondents cited shortage of coins in the last one year There was a preference for digital payments with increase with 41 per cent of those deeming it as a seasonal factor. in transaction value. However, non-familiarity with digital payment modes and safety concerns were reported as As regards banknotes, about 90 per cent of the merchant impediments in the usage of digital payment options, respondents utilised them for business transactions, especially in rural and semi-urban areas. travelling and exigencies. Easy availability of banknotes particularly of ₹100 and above was noted by the In sum, the survey indicated that, while cash remained respondents. Above 80 per cent of the respondents prevalent, the digital modes of payment were gaining reported that they did not face scarcity of banknotes in last traction among the public. one year. Procurement of New Shredding and Briquetting A pan India radio campaign through Akashvani/ Systems (SBS) Vividh Bharti/private FM radio channels was conducted to promote awareness on the MANI VIII.24 During the year, purchase orders were App. placed for procurement of new shredding and briquetting systems for 21 regional offices VIII.27 During the year, the Reserve Bank following due tendering process. Delivery embarked on an awareness campaign through and installation of these SBS machines will a media mix of print and radio to dispel commence from Q1:2024-25 and is likely to be misinformation about coins among members of completed in the next two years for all the offices. the public. Mobile Coin Vans (MCVs) for Distribution of Procurement of New Security Features for Indian Coins – Expansion in Geographical Reach and Banknotes Operational Scope VIII.28 The Reserve Bank is actively taking VIII.25 To enhance distribution of coins, the forward the process of introduction of new/ scheme of MCVs operating in select states has upgraded security features for banknotes. been extended across the country. Additionally, 4. Bharatiya Reserve Bank Note Mudran the scope of services has been broadened to Private Ltd. (BRBNMPL) facilitate the exchange of lower denomination notes, which are unfit for circulation. These MCVs VIII.29 The BRBNMPL has been playing a critical distribute coins and banknotes to the public role in designing, printing and supply of banknotes. located particularly in semi-urban, rural and It has been a key partner of the Reserve remote areas. Bank in implementation of its strategic goal of indigenisation of banknote production, including Awareness Campaign on Mobile Aided Note backward integration for raw materials. The Identifier (MANI) App and Misinformation on procurements by BRBNMPL are compliant with Coins directions issued under ‘Make in India’ initiative VIII.26 The MANI App was launched on January by the Government of India. BRBNMPL presses 1, 2020 to facilitate visually impaired persons to have increased direct remittances of banknotes identify denomination of Indian banknotes. The to currency chests, resulting in enhanced App notifies the banknote denomination in 11 logistical efficiency and cost effectiveness. At the regional languages apart from Hindi and English. behest of the Reserve Bank, BRBNMPL is also 160  CURRENCY MANAGEMENT establishing a Currency Research and 6. Conclusion Development Centre (CRDC) at its Mysuru VIII.31 During 2023-24, the Reserve Bank campus for conducting cutting-edge research in continued with initiatives to enhance banknote the domain of currency. distribution efficiency, increase public awareness 5. Agenda for 2024-25 on banknotes and coins and ensure availability of VIII.30 During the year, the Department will focus adequate quantity of clean banknotes and coins on the following: for the public. The Reserve Bank formulated an Carrying forward the project on action plan for modernisation and automation modernisation of the currency of currency management infrastructure and management infrastructure; smoothly conducted the process of withdrawal of Replacement of existing SBS machines; ₹2000 denomination banknotes from circulation. Exploring more sustainable and eco- Going forward, the Reserve Bank’s endeavour friendly disposal of currency note would be to modernise the currency management briquettes; infrastructure and sustain the self-sufficiency Finetuning policies and initiating measures for improving delivery of banknotes/coins in banknote production. Analytical research for to members of the public; and further strengthening the integrity of banknotes Implementation of technical standards and understanding the trends in public preference issued by BIS for NSMs used by banks for cash vis-à-vis other modes of payment shall across the country. continue to remain a focus area. 161