Prime Minister Narendra Modi, on November 8, announced the overnight scrapping of the Rs 500 and Rs 1000 denomination notes. This step was taken to tackle down the hoards of black money stored in Indian currencies all across the country. But this also meant that the country was going to suffer from a shortage of cash among other inconveniences. And suffer, it has. While complaints have been reported about the lack of planning and poor management and execution of the plan, it is important to know and understand how cash we so desire, gets generated and how it travels to us.
At the beginning of every calendar year, before the start of the fiscal, the Reserve Bank of India calculates the nation’s annual requirement of cash. It works on an econometric model which considers all the current notes in circulation, the number of destroyed notes and the notes that need to be replaced. According to IE, all of this is carried out by taking into account the projected GDP growth and inflation in the next fiscal year and a number of electronic transactions the last year. A RBI official told IE that the data is collected from the Reserve Bank’s 19 regional offices, following which the decisions are made about the currency allocated to each of these offices; the remittances are made quarterly. the Finance Ministry’s Coins and Currency division is then intimated about the allocation. The officials told IE that amount of currency to be printed every year is done with great secrecy between the Reserve Bank of India and the finance Ministry.
Following this, an order gets placed in the four currency note printing presses in the country; Nashik, Dewas, Mysore and Salboni. The Nashik and Dewas presses are run by the government while, the Mysore and Salboni presses are run by a subsidiary of the RBI, Bhartiya Reserve Bank Note Mudran (P) Ltd. These presses run throughout the year, producing currency notes according to the initial order.
IE reports that the high-security bank note paper is designed and supplied by the banknote paper mills in Mysuru and Hoshanabad in MP. The Mysuru mills, owned by the RBI can produce 12,000 metric tonnes, or 16 billion note pieces annually, whereas Hoshanabad can print up to 6,000 metric tonnes in a year. The security features and the design of the notes, like the multi-tonal, three-dimensional watermark, micro-lettering and security threads, which are different in different denomination notes are engraved at these two mills.
Following the engraving of the security features, these are transported to the four printing presses, where some additional security features are added, such as the optically variable ink, reflection of various colours etc. The paper is then transported into sealed containers as it gets ready. These notes are printed in sheets; each sheet can accommodate 40 notes of the new Rs 2000 denomination. One these are done with printing, they are bundled together in respect with their denominations.
These printed notes are then moved safely to the vaults of the 19 RBI offices in the country. For places where these vaults do not exist, IE says that 4000 additional currency chests take on the role of vaults with high tech security systems, CCTV cameras and concertina wire. There also happen to be 3,700 small coin vaults t commercial, co-operative and rural banks across the country. The RBI also keeps a daily record of the transactions undertaken at the currency chests through a currency accounting system.
It must be understood that even after these notes reach the currency vaults and chests, they are still technically paper. For these notes to become legal, the RBI prepare a voucher, which means that the currency has to be backed by the equivalent value of cash or securities, which happen to be either the government or sovereign bonds.
Loading into the ATMS:
Filling up ATMs, 2.2 lakh currently, is one of the most important and risky tasks in the process. According to IE, most banks have ‘managed service providers’, who take into account the historical data and place an order with the bank. These service providers then draw the cash from the bank chests and fill up the ATMs. According to Ie, some 8,800 cash vans of 7 registered logistics firms carry the cash to these ATMs.
These cash van drivers need to have police verification and the vans themselves need to go through several security requirements and carry a label of government duty.
The ATM replenishing process:
An ATM has four cassettes, each of which can hold up to 2,500 individual currency notes. Thus, the ATM can hold up to 10,000 notes at any given point of time. Normally, 2 cassettes are calibrated to contain Rs 100 notes and one each for Rs 500 and Rs 1000. Rituraj Sinha, President of the Cash Logistics Association of India told IE that in the absence of Rs 500 and Rs 1000 notes, the ATMs can hold a maximum cash of up to RS 5 lakh, which he said would get finished in a couple of hours. With recalibration the new high denomination notes, a full-fledged ATM can store up to RS 60 lakh, which could serve up to 3,000 customers, given the current withdrawal limit, he added. Sinha said that recalibration was a time-consuming task. He informed that over 20,000 ATMs had already gone through with the process of recalibration. He also said that it would take 20-22 more days for all the ATMs to be recalibrated.
According to former Finance Minister P. Chidambaram, the capacity of all the note printing presses together is to produce 300 crore notes in a month. He told IE that, “even if you print note for note, it will take seven months. If you print smaller denomination notes like Rs 100 for Rs 500, it will take 5 times more. There is only Rs 400 crore of counterfeit currency, 0.028% in a total circulation of Rs 16.24 lakh crore,” Former RBI Deputy Governor also agreed that the entire process to replace the old scrapped currency with the new denomination currency would take at least 6 months, given the capacity of the press two years ago.