Currency in the time of demonetisation

With the government’s historic demonetisation announcement on November 8 and the implementation thereon was met with mixed reaction, the fate and future of the Indian cash liquidity is largely dependent on the four ‘mints’ to produce and replenish 85% of the de-valued currency in circulation.

14 Dec 2016 | By Sriraam Selvam

The world’s second-largest producer and consumer of currency notes’ tryst with paper currency is said to have begun with the entry of European entrepreneurs and particularly so with the establishment of financial institutions like the General Bank of Bengal and Bihar, the Bank of Hindoostan and the Bank of Bengal.

The British government first issued rupee notes in India in 1862. These notes were sourced from the UK-based Thomas De La Rue. Interestingly enough, De La Rue was a printing playing cards and postage stamp printer before they ventured into the business of currency printing. Today, the almost 200-year-old company is the world’s largest commercial banknote printer.

In 1926, the British government constructed the region’s first-ever currency printing press in Nashik, Maharashtra and in 1928, it produced the Rs 5 note of the same new pattern that the Bank of England was printing since 1925. They were then released from Kanpur circle on October 9, 1928.

The press is also said to have printed high denomination currency of 1000 and 10,000 from 1931 in completely different pattern from Bank of England with the 10 and 50 notes also printed using a fresh pattern.

The first established press in Nashik continued printing currency till 1980 before shifting to a new location while the older unit is currently engaged in printing of passport.

Apart from the Nashik press, our currency is printed in Dewas, Madhya Pradesh which was established in 1973 along with two more centres in Mysuru (setup in 1999) Karanataka and Salboni (setup-2000) in West Bengal operated by Bharatiya Reserve Bank Note Mudran (BRBNML), a wholly owned RBI subsidiary.

According to a reputed blog, both the presses have installed the latest state-of-the-art technology in bank note printing. The machinery at Mysuru unit now is from KBA Giori (now known as KBA-NotaSys), Switzerland and that of the Salboni unit is by Komori, Japan. Both the presses are equipped with sophisticated security systems.

Some of the security features that are featured in the currency are optically variable ink, reflecting colours are included on the security paper. Embedded security features, such as the multi-tonal, three-dimensional watermark, micro-lettering and security threads.

India imported 95% of the watermarked paper required for currency notes from Germany’s Giesecke & Devrient and Britain’s De La Rue till 1968, the year when India's own security paper mill was started.

Security Paper Mill (SPM), Hoshangabad got its first pair of paper making machines commissioned on 27 June 1967 with third and fourth machine was commissioned on 27 November 1967. The mill is said to have been set up under expert collaboration from Portals of United Kingdom. Portals also provided the training to the staff and officers in paper making and allied processes. 55 officers were initially trained in 3 batches for a period of one year each. This facility has current production capability of 6000 metric tonnes per year.

From 2015, a new paper mill in Mysuru came into operation. This company a joint venture between Security Printing & Minting Corporation of India (SPMCIL) and Bharatiya Reserve Bank Note Mudran is engaged in production of bank note papers with a capacity of 12000 TPA.

According to its website, ‘The paper mill has commenced its production with effect from 9 November 2015 having installed two production lines with an installed capacity of 12000 metric tonnes per year (16 billion note pieces). Currently, the production is stabilised and has commenced its commercial production from April 2016 on line-1 and July 2016 on line-II.’

The full capacity production of security paper in India could save the government nearly Rs 1500 crore per year of import.

The now derecognised 500 and 1000 notes first came into circulation from October 1997 and November 2000 as a part of the Mahatma Gandhi Series of banknotes. The total number of the 500 and 1000 currency notes said to be in circulation was 2,204 crore (1,578 of 500 and 633 of 1000 notes) pieces. This number increased to 2,327 pieces (1,658 of 500 and 668 of 1000 notes) by October 2016.

In total all the four presses is considered to print 21,195 million pieces of notes against an indent of 23,900 million pieces with the facilities said to have a production capacity of over three billion “pieces” of currency every month. The Nashik and Dewas presses, operated by the SPMCIL under the finance ministry, is considered to print between 32-35% of notes.

The new Rs 2,000 notes are being printed almost entirely in the Bharatiya Reserve Bank Note Mudran facilities at Mysuru (which also has the distinction of designing the currency note) and in Salboni beginning from September 2016 while the other two presses have been producing the new Rs 500 notes.

Interestingly, the design of the new Rs 2,000 and Rs 500 notes reportedly started only about six months ago.

The companies which were expecting a New Year launch of the new currency notes have been caught by surprise by the government’s move and have been working additional shifts ( three shifts in total) to meet the requirement. The Mysuru press is said to employ about 420 permanent workers and 200 temporary workers.

Once the notes are printed the supply chain involves transportation of the banknotes to vaults in 19 offices of Reserve Bank of India across India. Additionally, 4000 currency chests are also maintained with state-of-the-art surveillance systems.

The last mile connectivity not only involves reaching the notes to the bank branches but the arduous task of replenishing approximately 2.2 lahs of ATMs countrywide. This is the most human-intensive stage which involves the effort of numerous teams from the seven registered cash logistics firms along with managed service providers employed by banks.