Central Banks and Cash Round-Up

In this, the latest in our monthly summary of central bank annual reports, we look at Thailand, India, Peru, Tunisia, Timor-Leste, Ukraine and Hong Kong.

Bank of Thailand (BOT)

In 2022 the number of banknotes in circulation in Thailand rose by 2% compared with a CAGR of 5% since 2012.

Thailand is seeing a very significant adoption of digital payments. The BOT 2022 Annual Report says it has concluded that the role of banknotes as a medium of exchange is gradually diminishing, while the store of value function is increasing. The report details four changes that it is making in response.

Printworks: the vision for Thailand’s printworks has moved from being world-class at the production and management of banknotes to being the world’s leading country at this, whilst its mission has changed to focus on ‘sufficiency in all situations, in accordance with other payment systems in the future, for the public’s confidence and satisfaction.’
Stock management: up until now the BOT established the lead time from re-order to supply and established a minimum stock holding commensurate with the reorder point. This was reviewed annually. Since July 2022 a ‘safety stock’ level has been set which will cope with fluctuations in banknote demand consistent with all events that may occur, bearing in mind the costs of production and distribution.

BOT has carried out a Production and Distribution Statistical Analysis (PDSA), including analysis of demand factors, regions and seasons, to ensure enough banknotes in every part of the country in the right place at the right time.

BOT has a recirculation policy for fit banknotes which has led to these being stocked up during the year and held available for use at different times of the year in line with seasonal requirements. This recirculation policy has led to the decline in the outstanding number of fit banknotes in stock, which reflected efficiency in the management of fit banknotes.

Consolidated cash centres: BOT identified that there was overlap between what it was doing and commercial entity cash centres. To optimise the efficiency of the whole cash system, particularly logistic costs, while maintaining banknote quality, it established four Consolidated Cash Centres (CCC) in 2022. More are planned, or are possible, depending on banknote demand.

Commercial entities can use BOT’s sorting machines in the BOT’s premises under the BOT’s supervision to ensure that all banknotes met the standard before distributing to the public.

An additional benefit is that CCCs will encourage the competitiveness and increase the efficiency of CCC’s services in the region, which reduce fees and support banknote handling in the future. It also gives BOT a clearer and more accurate overview of banknote usage.
20 baht polymer note: BOT has introduced a polymer 20 baht note and will gradually replace the paper notes with it. The introduction was based on an assumption that it will last 2.5 times longer than a paper note. It is hoped that it will reduce production costs by 30%.

Reserve Bank of India (RBI)

Currency in Circulation: the value and volume of currency in circulation rose by 7.8% and 4.4% respectively during the financial year (FY) 2022-23 as compared with 9.9% and 5% during 2021-22. The share of Rs 2,000 and Rs 500 banknotes accounted for 87.9% in value in terms of the total circulation as of 31 March 2023.

There was a decline in the share of low denomination notes, partly due to the substitution of small value payments by the UPI and mobile wallets, which was evident in the number of lower value transactions made using UPI.

Lower transactional cash demand was also evident in the larger decline in the number of cash withdrawals at ATMs than the value withdrawn, which led to increased withdrawal sizes.

While few denominations saw a fall in their overall volume in circulation between FY2022 and FY2023, Rs 500, Rs 200, and Rs 20 notes registered increases. The volume of Rs 20 notes grew from 11 billion in FY2022 to 12.58 billion in FY2023, denoting a year-on-year growth of 9.2%. Similarly, the volume of Rs 200 notes grew by 4.6% year-on-year to 6.26 billion.
Expenditure on security printing: the total expenditure incurred on security printing during 2022-23 was Rs 46.82 billion, as against Rs 49.84 billion in the previous year.
Counterfeits: during 2022-23, out of the total Fake Indian Currency Notes (FICN) detected in the banking sector, 4.6% were detected at the RBI and 95.4% at other banks. Compared to the previous year, there was an increase of 8.4% Rs 20 and 14.4% Rs 500 (new design) counterfeit notes detected.
Soiled banknotes: the disposal of these increased by 22.1% during 2022-23 compared with the previous year. An Expression of Interest has been issued to procure shredding and briquetting equipment.
Coins: the total value of coins in circulation increased by 8.1% in 2022-23, while the total volume increased by 2.6%.

The RBI worked on a pilot project to use Quick Response (QR) code based coin vending machines based on the Unified Payments Interface, or UPI (see CN March 2023).
Agenda for FY 2023-24: during the year, the RBI will focus on:
Achieving higher efficiency in currency management
The establishment of a facility for research on banknotes. An adversarial laboratory has already been opened at the Mysore campus of its printer BRBNMPL
A survey on quality of notes in circulation
Developing cash usage indicators
Mechanisms of cash dispensation. A study has been issued into the automation and logistics of currency management by IIT Bombay
Institutionalisation of the process of certification of note sorting machines in alignment with the prescribed sorting standards.

Banco Central De Reserva Del Perú (BCRP)

In 2022 the BCRP issued the new 20 and 50 sole designs, adding to the 10 and the 100 soles issued in 2021. The 1991 and 2011 designs continue to circulate.

BCRP is in the process or renewing the coin series, celebrating images and the history of personalities active in gaining independence for Peru. The fourth, fifth and sixth coins out of the nine Alpaca coin series were issued. Two commemorative silver legal tender coins were issued, one celebrating the centennial of the foundation of the central bank and the other the bicentennial of the Congress of the Republic.

The volume of banknotes in circulation fell by 4% and the value by 3.7%; the BCRP sees this as a correction of banknotes withdrawn as a store of value during the pandemic. The compound annual growth rate (CAGR) since 2018 has been 8%. The highest issue was for the 100 sole that is used in ATMs.

The 10 and 20 sole notes accounted for 71% of the 214 million notes that were withdrawn and destroyed.

In contrast, the volume of coins issued rose 6% and the value 6.8%. The CAGR since 2018 is 2%. The 10 cent coin accounted for the largest share of the volume of coins issued.

The National Mint produced 324 million coins, 30% more than in 2021. No coins were destroyed. The S0.10 and S0.20 are made of brass, the S0.50 and S1.00 from nickel-silver and the S2.00 and 5.00 are bimetallic.

Central Bank of Tunisia (CBT)

The value of cash in circulation in Tunisia rose by 9.24% in 2022 to TND 18.8 billion. Banknotes accounted for 97.5% of total cash. In 2021 the value of banknotes in circulation increased by slightly more, 9.4%.

Central Bank of Timor-De-Leste (BCTL)

The BCTL uses the US dollar, which it imports from the US, but issues Timor-De-Leste coins for use in the economy.

In 2022 BCTL imported $112.6 million banknotes, 25% fewer than in 2021. Cash in circulation is currently $316 million, including coins (centavos), which is down 16% compared to 2021.

There was an inflow of deposits and existing reserves, which means the amount put into circulation was higher than that imported by over $196 million.

The $20 is the most used in transactions in the country, followed by the $10 denomination. The $20 and $10 represent, respectively, 66% and 30% of total imports, 61% and 37% of notes in circulation and 52% and 43% of the total (re)deposited (‘fit currency’) by banks with the central bank.

Due to their frequent use, these two denominations register a very low degree of conservation, so that the (re)deposited amounts of ‘unfit currency’ and their repatriation to the country of origin of these banknotes have had a significant weight, 31% and 38% of (re)deposits, and 33% and 28% of repatriations, respectively.

National Bank of Ukraine (NBU)

The number of banknotes and coins in circulation was about 3 billion, worth UAH 710.5 billion, according to the NBU. There were about 14.2 billion small denomination and circulating coins worth UAH 5.5 billion and 23.5 million commemorative and investment coins worth nearly UAH 147 million.

In 2022 the number of banknotes in circulation decreased by 25.1 million, 0.8%, and the number of coins increased by 172.4 million, 1.2%; the 500 hryvnia banknote and the 10 kopilka coin are the most circulated at 26.5% and 28.5% respectively. The number of 1,000 hryvnia banknotes, first introduced in October 2019, was 148 million.

The number of counterfeits per 1 million hryvnia banknotes was 2.2. 5,346 counterfeit notes were found. In 2021 the ratio was 7.1 and in 2018, 2.5. The comparative figure for 2022 for euro banknotes was 13.

On 1 January 2023 the number of coins per person were 4.3% more than a year before. The number of banknotes was unchanged.

In 2022 the NBU continued withdrawing the 1, 2, 5 and 25 kopilka coins and the 1 and 2 hryvnia banknotes of the 2003-2007 designs, along with the 10 hryvnia circulating coins minted before 2018.

Hong Kong Monetary Authority (HKMA)

The HKMA annual report for 2022 says cash in circulation was up 2.2% on 2022 to HK$605.5 billion. The government issued HKK$12.9 billion, up 0.1% on the year, of which the HK$10 represented HK$4.8 billion. 81% of these were polymer notes. The HK$10 is printed by the government printworks.

In terms of volumes the picture is slightly different, with an 11% increase in demand for the HK$50, an 8% increase for the HK$50, 7% for the HK$20 and 5% for the HK$500. Only the HK$1,000 saw a fall, and this was 2%. Coin demand was flat.

Of the banknotes issued by the commercial banks (of which there are three), Bank of China accounted for 34.5%, Standard Chartered Bank for 9.1% and The Hong Kong and Shanghai Banking Corporation for 56.4%.