Three years after Rs 500 and Rs 1,000 currency notes were demonetised on November 8, 2016, the effect is still being felt in the currency printing sector.
The government’s currency printers and RBI are grappling with maintaining a balance between existing stocks and fresh printing of various denominations of currency, while enforcing the new security features, last introduced in 2005, against escalating costs.
Minutes of the last meeting of the Strategic Planning Group of the Currency and Coins Division of the Ministry of Finance, held on June 3, show that printing and bank note paper stock situation continue to be in flux after demonetisation. The meeting, held under the chairmanship of the Finance Secretary, approved the Bank Note Printing Plan for 2019-20, the long-term indent for coins, as well as the proposal for new security features.
The minutes show that one fallout of demonetisation has been the delay in approval of the new security features, which had been fast-tracked at the level of the Finance Minister in 2015. The minutes state, “Due to the withdrawal of Rs 500 and Rs 1000 denomination notes after demonetisation and introduction of new denominations of Rs 200 and Rs 2000, the inter-se revision of new security features among various denominations of bank notes has now been proposed by the RBI for approval.”
It was also stated by RBI officials at the high-level meeting that in view of demonetisation, the quantum of proposed new security features will change. According to the minutes, “Post demonetisation, the size and design of the bank notes have changed but the same security features are continuing. However, due to change in the size of bank notes of all denominations, the quantum of security features envisaged at the time of the floating of PQBN (Pre-Qualification Bid Notice) 2017 will also undergo a change.”
The meeting was informed that the most expensive security feature would be the security thread with moving images. The new security thread, the Managing Director of BNPMIPL (Bank Note Paper Mill India Private Limited) told the Strategic Planning Group was likely to take the cost of production of bank note paper up by as high as 30%-50%.
The rejig of denominations during demonetisation could have also altered the market demand for currencies. Thus, at the review of the bank note printing schedules for the current year, it was decided to limit the production of Rs 10 bank and Rs 20 bank notes by BRBNMPL (Bharatiya Reserve Bank Note Mudran Private Limited) to the existing level of available paper stocks. On Rs 20 banknotes, the minutes reveal, the RBI said it was facing a situation of “reverse flow of coins”. The flood of coins was described as “peculiar” by the RBI and the meeting was told that, “financial incentives provided by the RBI to banks for exchange may not work as there is a need for space for storage of coins at first”.