Stop supplying coins, RBI tells Centre

Kolkata, April 7: The Reserve Bank of India (RBI), faced with a problem of plenty regarding small-denomination coins, has informed the Union government that the banking system does not need fresh supplies from the four mints in the country.

At the beginning of every financial year, the RBI gives the government a projection of its coin requirements, based on which the government works out production plans for the mints and import requirements, if any. This year, the RBI has told the government that the system does not need any coins of denominations below Rs 5 for at least a year.

The demand for coins, particularly of lower denominations, has been declining over the past few years. Banks and merchant establishments are reluctant to accept coins — since no one wants loose change, it piles up in storage.

But the RBI’s request has alarmed workers of the mints, who get incentives based on actual production. The workers believe that is a move to corporatise the mints, which their union is opposing.

The All India Reserve Bank Employees Association wants the central bank to beef up its currency management. “In some pockets, particularly temple towns, there is an excessive supply of coins, while some areas need coins,” said one representative.

Senior RBI officials acknowledged this supply side problem but said it has been addressed.

The RBI’s latest annual report notes: “There has also been a reverse flow of coins of 5 paise, 10 paise and 20 paise denominations.” According to the report, value of Rs 5 coins in circulation increased at an average rate of 12% over the last two years. Total volume of coins in circulation increased to 8,601 crore pieces as on end-March 2004 from 7,831 crore pieces at the end of 2001-02.