RBI has now storing approximately 9 billion coins, while the projected indent given by the RBI to the Security Printing & Minting Corporation of India (SPMCIL) for the year 2019-20 is 3,400 million coins.
Indian economy is experiencing a new phenomenon described as ‘reverse flow’ of coins, which has left the Reserve Bank of India with a glut of as many as 900 crore coins that might be on the “verge of collapsing due to weight” The Indian Express reported over the weekend.
The reverse flow is the flow of coins from the public back to the central bank. This happened mainly on the back of higher production of coins following demonetisation and general preference of currency notes over coins in the public.
These coins have come on the verge of collapsing due to weight due to problems with storage and buildings holding, revealed the documents accessed by The Indian Express.
The Modi government had demonetised currency notes of 500 and 1000 denomination on November 8, 2016, to check black money. This has resulted in fall in currency in circulation of GDP by over 1 per cent points to 10.48 per cent in the two years after demonetisation, according to a finance ministry official.
The issue of coin glut raised by the central bank in various meetings with the government has prompted the government to look for the possibility of privatising the distribution of coins, which will require legal amendments and exports of coins countries such as Brazil, Sri Lanka, and the Maldives.
RBI has now storing approximately 9 billion coins, while the projected indent given by the RBI to the Security Printing & Minting Corporation of India (SPMCIL) for the year 2019-20 is 3,400 million coins, wrote The Indian Express on Sunday. This, incidentally is only a third of SPMCIL’s production capacity, it added.
The higher production capacity created post demonetisation to fuel consumption in the economy and long term reduction in the coin demand by the general public who prefer currency notes instead require the reduction in indents of coin.
The current indents for coins given by the RBI is a staggering 8,700 million pieces for the year 2020-21, and an even higher 9,800 million pieces for 2021-22. The indents for coins should be reduced for a longer period and that the SPMCIL can plan for either export of coins and/or a reduction of capacity, wrote The Indian Express.