How is Money Distributed in India???

 

The distribution network of currency notes and coins is completely different as compared to any other product, as it requires a great deal of responsibility and very high level of security. The RBI manages this task of issuing, managing and distributing the currency notes and coins all through out the country. The major differences are, availability and the sheer nature of the product being distributed. Unlike FMCG and other products, currency is required by all the 130+ Million people that live in this beautiful country, this covers people living in major metros like NCR, Bombay, Hyderabad, Chennai to people living in small villages to which the electrical wires haven’t found their way as yet. The supply chain of currency in India majorly includes two modes of transportation i.e. rails for long distances and roads for the last mile delivery. The only problem is they both are not as secure as they should be. As the popular saying goes, “everyone other than goddess Laxmi needs money”, a hairline flaw anywhere in the supply chain of could lead to major mishaps. In the month of August 2016; the Chennai – bound Salem express was looted of INR 342 Crores.

A brief history:

Paper currency was first issued during the British East India Company rule, and the initial paper notes were issued by private banks such as Bank of Hindustan and the Presidency Banks during the late 18^th century, under the paper currency act of 1861, the British Government of India was conferred the monopoly to issue the paper notes in India.

 

Distribution

The RESERVE BANK OF INDIA; RBI manages the currency in India along with the Government of India. RBI has offices located at Ahmedabad, Bangalore, Bhopal, Bhubaneshwar, Belapur (Navi Mumbai), Kolkata, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Lucknow, Mumbai (Fort), Nagpur, New Delhi, Patna and Trivandrum. These offices receive fresh currency notes from the note presses. Similarly, the RBI offices located at Kolkata, Hyderabad, Mumbai, and New Delhi initially receive the coins from the mints. These offices then send them to the other offices of RBI. The currency notes and coins are stocked at currency chests and small coins at the small coin depots, these can be considered as currency warehouses. The bank branches receive the bank notes and coins from these chests and depots for further distribution among people. To facilitate the distribution of notes and rupee coins, the RBI has authorized selected branches of banks to establish currency chests. There are actually storehouses where bank notes and rupee coins are stocked on behalf of RBI. At present there are over 4422 currency chests in the country.

Specially built trucks for short distance (journey completed during the day only), railways for long distances guarded by police, remittance accompanied by officials of RBI to chests. Further movement from chest to a branch is done by the concerned bank.

Challenges of Distribution

The size of the country, the population to which the currency has to be distributed and volume of currency that is being handled at once. As discussed earlier, only by looting one wagon, the thieves were able to get 342 Crores, which will be sufficient for the rest of their lives.

Other challenges are the security and availability of railway wagons as and when required and political boundaries defining jurisdiction of Issue. Offices contribute to sub-optimal logistics, cross-currency movements, security police are concerned with other priority operations, private security is inaccessible and unfavorable, rail transport requires an immense organization of logistics and transport privatization – only recently implemented in the case of coins.