How RBI reaches currency notes and coins to the people

Eight quick facts on how money is issued, managed and distributed in the country

The Reserve Bank ogf India's task of issuing, managing and distributing currency notes and coins is a meticulous one that involves a great deal of co-ordination and calls for a high level of security procedures, among other things. A small lax anywhere in the currency supply chain could lead to mishaps of the kind that took place on Tuesday, when cash was stolen from the Chennai-bound Salem Express carrying about Rs 342 crore.



Here are eight quick facts on how the RBI goes about doing its job:

How currency is issued in India

Paper currency was first issued during British East India Company rule. The first paper notes were issued by the private banks such as Bank of Hindustan and the presidency banks during late 18th century. Via the Paper Currency Act of 1861, the British Government of India was conferred the monopoly to issue paper notes in India.

What are the present denominations of bank notes in India?
At present, notes in India are issued in the denomination of Rs 5, Rs 10, Rs 20, Rs 50, Rs 100, Rs 500 and Rs 1,000. These notes are called bank notes, as they are issued by the Reserve Bank of India. The printing of notes in the denominations of one rupee and Rs 2 has been discontinued as these denominations have been coinised. However, such notes issued earlier are still in circulation. The printing of notes in the denomination of Rs 5 had also been discontinued; however, it has been decided to reintroduce these notes so as to meet the gap between the demand and supply of coins in this denomination.

How currency management happens
The Reserve Bank manages currency in India. The Government, on the advice of the Reserve Bank, decides on the various denominations. The RBI also co-ordinates with the Government in the designing of bank notes, including the security features. It estimates the quantity of notes that are likely to be needed denomination-wise and places the indent with the various presses through the Government of India. The notes received from the presses are issued and a reserve stock maintained. Notes received from banks and currency chests are examined. Notes fit for circulation are reissued and the others (soiled and mutilated) are destroyed so as to maintain the quality of notes in circulation. The Reserve Bank derives its role in currency management on the basis of the Reserve Bank of India Act, 1934.

How does the Reserve Bank reach the currency to the people?
RBI manages the currency operations through its offices located at Ahmedabad, Bangalore, Bhopal, Bhubaneshwar, Belapur (Navi Mumbai), Kolkata, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Lucknow, Mumbai (Fort), Nagpur, New Delhi, Patna and Thiruvananthapuram. These offices receive fresh notes from the note presses. Similarly, the Reserve Bank offices located at Kolkata, Hyderabad, Mumbai and New Delhi initially receive the coins from the mints. These offices then send them to the other offices of the Reserve Bank. The notes and rupee coins are stocked at the currency chests and small coins at the small coin depots. The bank branches receive the bank notes and coins from the currency chests and small coin depots for further distribution among the public.

What is a currency chest?
To facilitate the distribution of notes and rupee coins, the Reserve Bank has authorised selected branches of banks to establish currency chests. These are actually storehouses where bank notes and rupee coins are stocked on behalf of the Reserve Bank. At present, there are over 4,422 currency chests. The currency chest branches are expected to distribute notes and rupee coins to other bank branches in their area of operation.

RBI is located only in 18 places for currency operations. Distribution of notes and coins throughout the country is done through designated bank branches, called chests. A chest is a receptacle in a commercial bank to store notes and coins on behalf of the Reserve Bank. Deposit into chest leads to credit of the commercial bank’s account and withdrawal leads to debit.

What is a small coin depot?
Some bank branches are also authorised to establish small coin depots to stock small coins. There are 3,784 small coin depots spread throughout the country. The small coin depots also distribute small coins to other bank branches in their area of operation.

Movement of Treasure
Specially built trucks for short distance (journey completed during the day), railways for long distance Guarded by police, remittance accompanied by officials of RBI to chests. Further movement from chest to a branch done by the bank concerned

Challenges of distribution
Size of the country and volume of currency, security and availability of railway wagons when required, political boundaries defining jurisdiction of Issue Offices lead to sub-optimal logistics, cross movement of currency is unavoidable, cross movement of currency, security- police is preoccupied with other activities of priority, orivate security is unavailable and not favoured, transport through railways involves enormous coordination of logistics and privatisation of transport – introduced recently in respect of coins only.