The thrust of currency management during the year was to make available adequate quantity of clean notes in circulation. The year witnessed a higher than average increase in banknotes in circulation primarily due to precautionary holding of cash by the public induced by the COVID-19 pandemic, and its prolonged continuance. The Reserve Bank continued its efforts towards upgrading the infrastructure for currency management.

VIII.1 The Reserve Bank’s currency management function is guided by the goal of ensuring adequate supply of clean banknotes of various denominations in the economy. During the year, when the precautionary demand for cash surged in the economy with the onset of the COVID-19 pandemic, the Reserve Bank endeavoured to meet the increased demand for banknotes. Concerted efforts were made to ensure that Currency Chests (CCs) remain adequately stocked with all denominations of banknotes in order to maintain timely supply of fresh banknotes across the country.

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 agenda for 2020-21 and section 4 presents the work profile of Bharatiya Reserve Bank Note Mudran Private Ltd. (BRBNMPL), a wholly owned subsidiary of the Reserve Bank. Section 5 sets out the agenda for 2021-22, 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 notes in denominations of ₹2, ₹5, ₹10, ₹20, ₹50, ₹100, ₹200, ₹500 and ₹2,000. 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 16.8 per cent and 7.2 per cent, respectively, during 2020-21 as against an increase of 14.7 per cent and 6.6 per cent, respectively, witnessed during 2019-20. In value terms, the share of ₹500 and ₹2,000 banknotes together accounted for 85.7 per cent of the total value of banknotes in circulation as on March 31, 2021, as against 83.4 per cent as on March 31, 2020. In volume terms, ₹500 denomination constituted the highest share at 31.1 per cent followed by ₹10 denomination banknotes which constituted 23.6 per cent of the total banknotes in circulation as on March 31, 2021 (Table VIII.1). Whereas the share of ₹500 denomination banknotes in the total volume of banknotes showed an increasing trend from 19.8 per cent as on March 31, 2019 to 25.4 per cent as on March 31, 2020 and to 31.1 per cent as on March 31, 2021, the share of ₹10 denomination banknotes in the total volume showed a declining trend from 28.7 per cent as on March 31, 2019 to 26.2 per cent as on March 31, 2020 and to 23.6 per cent as on March, 31, 2021.

Coins

VIII.5 The total value of coins in circulation increased by 2.1 per cent in 2020-21, while the total volume increased by only 1.0 per cent. As on March 31, 2021, coins of ₹1, ₹2 and ₹5 together constituted 83.8 per cent of the total volume of coins in circulation, while in value terms, these denominations accounted for 77.6 per cent (Table VIII.2).

Currency Management Infrastructure

VIII.6 The functions relating to 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, 2021, the State Bank of India accounted for the highest share (55.0 per cent) in the currency chests network (Table VIII.3).

Indent and Supply of Currency

VIII.7 The indent of banknotes was lower by 9.7 per cent in 2020-21 than that of a year ago. The supply of banknotes was also marginally lower by 0.3 per cent during 2020-21 than in the previous year (Table VIII.4).

VIII.8 During 2020-21, the indent and supply of coins were lower by 11.8 per cent and 4.7 per cent, respectively, from their levels in the previous year (Table VIII.5).

Disposal of Soiled Banknotes

VIII.9 The disposal of soiled banknotes was initially affected due to the COVID-19 pandemic and was expedited during the latter part of the year 2020-21. Despite efforts, the year as a whole still witnessed a 32 per cent decline in the disposal of soiled banknotes as compared to the previous year (Table VIII.6).

Counterfeit Banknotes

VIII.10 During 2020-21, out of the total Fake Indian Currency Notes (FICNs) detected in the banking sector, 3.9 per cent were detected at the Reserve Bank and 96.1 per cent by other banks (Table VIII.7).

VIII.11 Compared with the previous year, there was an increase of 31.3 per cent in counterfeit notes detected in the denomination of ₹500 [Mahatma Gandhi (New) Series]. However, there was a decline in counterfeit notes detected in other denominations (Table VIII.8).

Expenditure on Security Printing

VIII.12 The total expenditure incurred on security printing during July 1, 2020 to March 31, 2021 was ₹4,012.1 crore as against ₹4,377.8 crore in the previous year (July 2019 to June 2020).

3. Agenda for 2020-21: Implementation Status

Goals Set for 2020-21

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

• Automation of banknote handling process (Utkarsh) [Para VIII.14]

• Upgrade the infrastructure and processes for currency management by inducting modern technology.

• Microsite for banknotes (Para VIII.15)

• Continue the process of designing and developing a microsite to host basic information on features of banknotes and information relating to currency management – information on banknotes will be presented through various multimedia with simple and efficient navigation;

• Displaying 360-degree view of the design and security features of banknotes through explanatory videos and animation;

• Informative material on exchanging banknotes/note refund rules; and

• Interactive games and posters.

Implementation Status of Goals

Automation of Banknote Handling Process

VIII.14 In order to upgrade the infrastructure and processes for currency management, the Reserve Bank is in the process of engaging a consultant to get the technical assistance required for inducting modern technology and automating the processes of banknote handling, in a green-field facility on a pilot basis. This is expected to automate receipt, storage, processing and destruction of banknotes; foster economies of scale; make the currency management function more efficient; and also fulfil the objective of clean note policy of the Reserve Bank (Box VIII.1).

Microsite for Banknotes

VIII.15 The development of the microsite, which will host basic information on features of banknotes and information relating to currency management is in progress. The microsite shall provide a platform to the public to access information on banknotes such as information on design and security features through 360-degree view of the banknotes, various multimedia (videos and animation) and interactive games, with simple and efficient navigation.

Other Major Activities

Procurement of New Security Features for Indian Banknotes

VIII.16 The Reserve Bank is actively involved in taking the process of procurement of security features for banknotes forward.

Integration of Currency Management Functions with Core Banking Solution (e-Kuber)

VIII.17 With the implementation of phase I and phase II of the Currency Management Module (CyM) in e-Kuber; the accounting of currency transactions is reflected in the Reserve Bank’s books in near real time basis. Some ancillary functionalities of Phase III of CyM module are under various stages of development/implementation.

Introduction of Varnished Banknotes - Field Trial

VIII.18 The Reserve Bank is in the process of introducing varnished banknotes in ₹100 denomination on a field trial basis with a view to elongate the life of the banknote.

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

VIII.19 BRBNMPL is a wholly owned subsidiary of the Reserve Bank, which is playing a crucial role in the indigenisation of banknote production processes. The captive Ink Manufacturing Unit (IMU), which was set up by BRBNMPL within its Mysuru press premises, has an installed capacity to manufacture 1,500 metric tonnes (MT) of Offset, Intaglio, Numbering and Colour Shift Intaglio Inks (CSII) per annum in two shift operations. While the production of Offset, Intaglio and Numbering inks commenced from August 2018 and that of CSII from March 2019, the entire requirement of Offset, Intaglio, Numbering and CSII for the year 2019-20 onwards has been met by the in-house manufacturing unit of BRBNMPL. BRBNMPL is also supplying CSII to the two currency printing presses of Security Printing and Minting Corporation of India Ltd. (SPMCIL). During 2020, with the installation of in-house varnish making plant, the company has become self-sufficient in different type of varnishes required including varnish for CSII. This marks a significant step towards backward integration and achieving its ultimate goal of complete indigenisation of banknote production processes.

5. Agenda for 2021-22

VIII.20 During the year, the Department will focus on the following:

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

• Augmentation of disposal of soiled notes; and

• Establishment of a state-of-the-art facility for conducting cutting edge research to test robustness of security features of currency notes and introduction of new security features.

6. Conclusion

VIII.21 In sum, during the year 2020-21, the Reserve Bank remained focused on strengthening the currency management infrastructure, enhancing public awareness on different features of Indian banknotes and making adequate quantity of clean notes available to the public. Going ahead, the Reserve Bank’s endeavour would be to enhance the lifespan of banknotes, automate the handling and processing of notes, and rationalise the available infrastructure for maximum utilisation.