MUMBAI: The US banknote, the most ubiquitous currency in the world used in everything from drug deals to legally accepted tender in multiple countries, falls short of the rupee when it comes to circulation numbers. RBI deputy governor Shirish Chandra Murmu said there are three times as many rupee banknotes in circulation as US dollar bills and nearly six times as many as euro notes. While the number of notes is determined by multiple factors, including GDP growth, inflation and interest rates, the RBI is trying to contain the cost of currency by extending the life of banknotes using polymer.“Over the past few years, we have produced between 28 and 30 billion banknotes annually across six denominations, and disposed of roughly 21 billion pieces a year. As of today, 176 billion banknotes are in circulation in India. By comparison, roughly 56 billion US dollar bills and 30 billion euro banknotes were in circulation at the end of last year,” Murmu said.Murmu said the comparison partly reflected India’s denomination mix, which is weighted towards lower-value notes and therefore requires more pieces to carry out transactions of the same value. “Even so, the volume gives you a sense of the scale of the logistics we manage every day,” he said in a keynote address at a cash management conference organised by Bank Indonesia in Jakarta on August 13.The RBI projects currency demand five years ahead, separating transactional demand from replacement demand. Transactional demand is driven by expected changes in currency in circulation, GDP growth, interest rates, food inflation and the adoption of digital payments, while replacement demand reflects the need to withdraw old and unfit notes.Cash has continued to grow despite the expansion of digital payments. “Currency in circulation continues to grow at double-digit rates even as cash’s share of individual transactions declines, thanks to growing digital payment adoption,” Murmu said, describing this as a “cash paradox” that makes future demand harder to predict.India produces between 28 billion and 30 billion notes annually through banknote paper mills, four currency printing presses and ink production units owned and controlled by the RBI and the government. The central bank’s Clean Note Policy, introduced in 1999, requires it to make good-quality notes available to citizens and continuously replace notes deemed unfit for circulation.The RBI distributes currency through its 19 regional offices and a network of currency chests operated by commercial and cooperative banks and government treasuries. Currency also reaches the public through bank branches, more than 250,000 ATMs and cash dispensers, and millions of business correspondents, particularly in rural areas and smaller towns.Currency chests collect circulated notes, sort them and send soiled or mutilated notes for disposal. The network handled the 2016 demonetisation exercise and the 2023 withdrawal of Rs 2,000 notes, serving as collection and redistribution points.Murmu said the RBI was examining ways to make notes last longer as it seeks to reduce the cost of replacing them. “We are exploring ways to extend the life of banknotes, including surface coatings on the substrate, and polymer notes for lower denominations,” he said.The central bank is also working to reduce the carbon footprint of the cash cycle by improving the efficiency of its distribution network and finding better uses for banknote briquettes after disposal.“Cash remains a significant mode of payment in the Indian economy, and preserving trust in it, through clean notes, secure logistics, and a currency ecosystem people can rely on, is central to preserving monetary sovereignty itself,” Murmu said.
