Banknotes

Banknotes

Subject: Economy

Section: Monetary Policy

Context:

The Reserve Bank of India (RBI) seems to have shelved its plastic banknote project with the surge in digital payments, further due to its ability to withstand India’s high temperature and the central bank’s plans to launch a Central Bank Digital Currency (CBDC) in FY23.

The Bharatiya Reserve Bank Note Mudran Private Ltd (BRBNMPL) and the Security Printing and Minting Corporation of India Ltd (SPMCIL) have taken up the project of printing a billion pieces of bank notes in denomination of Rs 10 on all available plastic (polymer) substrates and issued to the public in five cities in different climatic zones

— Kochi, Mysuru, Shimla, Jaipur and Bhubaneswar — on a trial basis.

Concept:

Powers?

The Department of Currency Management in the RBI has the responsibility of administering the functions of currency management, a core function of the Reserve Bank in terms of the Reserve Bank of India Act, 1934. 

This involves forecasting the demand for fresh notes and coins, placing the indent with four printing presses and mints, receiving supplies against those indents and distributing them through the 18 offices of the Bank, a wide network of currency chests, repositories and small coin depots.

Acts and Laws?
Section 22 of the RBI Act, Reserve Bank of India has the sole right to issue banknotes in India.

Section 25 states that the design, form and material of bank notes shall be such as may be approved by the Central Government after consideration of the recommendations made by the Central Board of RBI.

The Reserve Bank in terms of its clean note policy, provides good quality banknotes to the members of the public. The Reserve Bank, in consultation with the Central Government and other stakeholders, estimates the quantity of banknotes that are likely to be needed denomination-wise in a year and places indents with the various currency printing presses for supply of banknotes.

The Government of India is responsible for the designing and minting of coins in various denominations as per the Coinage Act, 2011.The Indian 1-rupee note (Rs 1) is made up of hundred 100 paise as Rs 1 = 100 paise. Currently, it is the smallest Indian banknote in circulation and the only one being issued by the Government of India.

Printing:

Bank notes are printed at four currency presses,

• two of which are owned by the Government of India through its Corporation, Security Printing and Minting Corporation of India Ltd. (SPMCIL) located at Nasik (Western India) and Dewas (Central India). 
• two are owned by the Reserve Bank, through its wholly owned subsidiary, Bharatiya Reserve Bank Note Mudran Private Ltd. (BRBNMPL) located at Mysore (Southern India) and Salboni (Eastern India).

Coins are minted in four mints owned by SPMCIL. The mints are located at Mumbai, Hyderabad, Kolkata and NOIDA. The coins are issued for circulation only through the Reserve Bank in terms of Section 38 of the RBI Act.

Distribution:

The Reserve Bank presently manages the currency operations through its 19 Issue Offices located at Ahmedabad, Bengaluru, Belapur, Bhopal, Bhubaneswar, Chandigarh etc. Further, a wide network of currency chests maintained and managed by scheduled banks are part of currency management architecture.

The Issue Offices receive fresh banknotes from the currency printing presses which in turn send fresh banknote remittances to the currency chests. Direct remittances by the presses to the currency chests also happen.

The Reserve Bank offices located at Hyderabad, Kolkata, Mumbai and New Delhi (Mint Linked Offices) receive coins from the mints. These offices then send the coins to the other offices of the Reserve Bank who in turn send the same to Currency Chests and Small Coin Depots.

Banknotes in circulation?

Banknotes in India are currently being issued in the denomination of Rs 10, Rs 20, Rs 50, Rs 100, Rs 200, Rs 500, and Rs 2000. These notes are called banknotes as they are issued by the Reserve Bank of India.

The printing of notes in the denominations of Rs 2 and Rs 5 has been discontinued though  it continues to be legal tender.

Rs 1 notes are issued by the Government of India from time to time and such notes including those issued in the past also continue to be legal tender for transactions.

The bank branches receive the banknotes and coins from the Currency Chests and Small Coin Depots for further distribution among the public.

In terms of Section 24 of the Reserve Bank of India Act, 1934, bank notes shall be of the denominational values of two rupees, five rupees, ten rupees, twenty rupees, fifty rupees, one hundred rupees, five hundred rupees, one thousand rupees, five thousand rupees and ten thousand rupees or of such other denominational values, not exceeding ten thousand rupees, as the Central Government may, on the recommendation of the Central Board, specify in this behalf.