The money no one wants: Bankers, traders grapple with a coin-glut 'crisis'

Bankers, traders grapple with a coin-glut 'crisis'

Traders and citizens are finding it difficult to deal with a glut of coins in the market, even as bankers are groping for solutions to curb the huge inflow of metal money. Much of the problem is on account of Rs 10 coins, the value of circulation of which has surged about 40 per cent in value in the past year, according to data from the Reserve Bank of India (RBI).

The abundance of coins occurred mainly after the government banned Rs 1,000 and Rs 500 notes on November 8 last year. With demonetised notes already occupying large portions of bank vaults, there is a severe shortage of space in banks for storing coin. 

RBI issued a circular in July, limiting per-day deposits of coins not lower than  Rs 1 denomination to Rs 1,000, and Rs 10 for 50p coins. Earlier, banks would accept 10 per cent of total deposits in the form of coin. After the note ban, a spike in the number of coins in circulation has led to their oversupply. 

“The trader community is not willing to accept coin. Storing coin is a problem as it requires a lot of manpower for counting and occupies a lot of space. We are trying to sensitise traders to accept coins in our branches,” said a senior official of State Bank of India.

Shopkeepers and traders have their own problems. “We have stacks of Rs 10 coin but banks are refusing to accept these. At the same time, customers are also refusing to take these coins,” said Rajkumar Agarwal, a retailer of spices in Kolkata. 

Bikas Banik, another shopkeeper, said, “We generally don’t accept Rs 10 coins because of their oversupply. Even banks are now not allowing coin deposits beyond a limit.”

 

According to RBI data, the value of Rs 10 coin stood at Rs 5,204 crore as on March 31, 2017, as against Rs 3,703 crore a year ago, an increase of over 40 per cent.

On the advice of RBI, banks are also organising “coin camps” to get rid of these, but without success. “After demonetisation, a chunk of the currency in circulation was replaced by coin. At the branch level, we took up the matter with the management, which referred it to RBI, which in turn advised us to conduct coin camps. However, these camps have not been of any help as no one is willing to accept coin,” said an official of a public sector bank.

While the supply of coin has increased over the years, the number of currency chests has not changed much. At the end of December 2016, there were 4,033 currency chests in India, as against 4,102 the previous year. In fact, the number of depots and sub-depots for small coin came down from 3,783 at the end of December 2015 to 3,727 at the end of December 2016, according to the data.

Currency chests are bank branches authorised by RBI to facilitate distribution of notes and coin to other bank branches in their area of operation.

“Bank deposits have gone up and the accumulated cash is yet to be shifted to RBI. There is no space in banks, and there is resistance from people to coins. This is causing a lot of inconvenience,” said a senior official of UCO Bank.

In the grey market, where coins used to sell at a premium of 10-15 per cent due to short supply, there is a clear reversal of trend. Now, they are selling at a 10-15 per cent discount due to excess supply.