RBI Annual Report Reflects a More Normal Year

The Reserve Bank of India (RBI) has issued its annual report for 2021-22. The backdrop for the year was India’s second and third wave of the pandemic, which affected operations.

Key observations from the annual report are:

• The growth in cash in circulation fell back to less than the trend rate of the last ten years.

• The coin indent was reduced by 73% due to the level of stocks and reduced demand.

• Counterfeiting started to increase, although it remained significantly behind 2019-20.

• The RBI was able to make significant progress tackling the backlog of soiled notes awaiting destruction.

• A national consumer survey has provided insights into cash usage.

• Action was taken to address an issue with ATMs not being properly re-stocked with notes and coin distribution.

• The production of colourshift ink now takes place in India by Bharaytiya Reserve Banknote Mudran Private Limited (BRBMPL).

Banknotes and coins

The R500 and R2,000 notes account for 87.1% of the value of cash in circulation (CIC), up slightly from the previous year when it was 85.7%. The R500 has the highest share of CIC by volume, 34.9%, followed by the R10, 21.3%.

The volume of the R2,000 has been falling steadily since it was introduced in 2017, down 35% during this period. Volumes of the R100 and R10 have also fallen every year since 2017. The R500 has grown significantly, with the R200 and R20 also growing.

Overall volumes were up 5% and values 10% in 2021-22, compared with 7.2% and 16.8% respectively for the previous year.

The consumer survey found the R100 to be the most popular note and the R2,000 the least popular.

Expenditure on security printing fell by 20% to R40.12 million.

Just under 231,000 counterfeit notes were detected, up 10% over the previous year. The most commonly counterfeit denomination was the R100, followed by the R500.

Meanwhile, coin volumes were up 1.3% and the value increased by 4.1%. Coin volumes have been increasing about 1% each year for the last four years.

The R1, R2 and R5 accounted for 83.5% of the volume and 75.8% of the value. However, the R5 volumes are growing strongly, 5.2%, with the next nearest being the R2 at 2.8% growth. The new R20 was launched last year and has more than doubled in volume, but remains a miniscule number of the total.

2021-22 agenda

The disruption caused by the pandemic meant that only one of the three agenda items for the year made significant progress, namely clearing the backlog of notes awaiting disposal, which increased by 88.4%. The other two have been carried forward to 2022-23.

The RBI did continue with work in six other areas:

• A microsite for banknotes demonstrating the security features and providing information on note exchange.

• A media awareness campaign focusing on the exchange of banknotes.

• A banknote survey of 11,000 people in 28 states and three unions to increase the RBI’s awareness of public views on banknotes and coins.

• The procurement of new security features.

• The introduction of penalties for banks and independent operators who did not replenish their ATMs.

• Increased incentives for the distribution of coins. The incentive to those taking part in the Currency Distribution and Exchange Scheme was increased from R25 to R65 per bag. In rural and semi-rural areas an additional R10 is offered. The rules were also changed to allow banks to provide coins in bulk to their customers.

Agenda 2022-23

The agenda items carried over from 2021-22 are the procurement of new shredding and briquetting systems and the establishment of a state-of-the-art facility to test the robustness of security features and the introduction of new features.

The RBI will also carry out a study on automation and logistics in currency management, introduce a Mobile Aid Note Identifier app (MANI) for use by the visually impaired, adding 11 regional languages to Hindi and English, and carry out a survey of the usage of cash, coins and digital payment options.

The RBI has also announced that it is studying a possible future issue of a Central Bank Digital Currency.