Impact of COVID-19 on Cash Operations in Malaysia

The year of the pandemic saw Bank Negara Malaysia (BNM) take a wide range of steps to ensure payments worked effectively, according to its 2020 Annual Report.

At the start of the pandemic there was a surge in demand for banknotes, an increase of 7.3% more notes in circulation over the year, and during the year BNM received 23% fewer notes back. It dealt with these changes by drawing down on its buffer stocks and working with the financial institutions and cash in transit (CIT) companies, which were declared as essential services, to ensure Malaysia’s 12,000 ATMs and cash cycle were properly stocked.

BNM processed 2.3 billion notes during the year, down from 2.9 billion in 2019. 23% of those notes were destroyed, slightly more than the 20% destroyed in 2019. A new act of parliament was introduced, the Currency Act 2020, which works alongside the 2009 Central Bank Malaysia Act. This includes the need for organisations involved in the collecting, sorting and packing of banknotes by quality, quantity and denomination to register as currency processors. The law allows BNM to introduce regulations relating to these organisations.

BNM managed its cash issue and sorting by splitting its operations and back-up teams and enacting its business continuity plans. Across its five Automatic Cash Centres (ACC) sites and BNM offices across the country, it carefully followed the appropriate pandemic health and safety measures. These activities have enabled cash sorting operations to continue.

The value of cash in circulation increased by 14.3%, a significant rise both on the 10 year average increase, 8.9%, and the 2019 increase, 7.3%. Cash as a percentage of GDP is now 8.3% compared with 6.6% at the end of 2019.

The annual report put these changes in context by referring to the Currency News™ September 2020 edition which reported that the median average annual growth in cash in circulation across 53 countries was 14.5% compared with 6.7% in the comparative 2019 period. More than 60% of those countries had recorded their highest annual growth of cash in circulation.

Coin circulation presented a challenge, as it has in other countries. BNM estimates 30% of coins issued each year are ‘dead coins’, ie. stored and not circulating. Malaysia mints its coins at Kilanj Wang (KWG). BNM worked hard with businesses, financial institutions and CITs to encourage the recirculation of coins. 82.1 million were recirculated, 19.1% of the total minted by KWG.

Other currency matters

The level of counterfeiting fell from one part per million in 2019 to less than that in 2020.

BNM gave data demonstrating why recirculation of notes, rather than issuing new notes, is beneficial to the environment. Based on recirculating 500 million notes rather than issuing new notes, 1,450 tonnes of CO2 is saved. 500 million new notes require 80 tonne of ink and uses two million kWh of electricity, enough to power 7,500 Malaysian homes for a month.