The RBI has a coin distribution problem - and it might be thinking about outsourcing the job to someone else

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The RBI has a coin distribution problem - and it might be thinking about outsourcing the job to someone else

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  • It seems that Indians are losing interest in using coins - not only because of their weight but also the move towards cashless transactions.
  • Amid an oversupply of coins, storage costs are getting unfeasible as the RBI is running out of space to keep them.
  • As a result, the RBI is looking to outsource the distribution of coins to a private player and even export base coins to countries like Brazil and Sri Lanka.
It seems that Indians are losing interest in using coins - not only because of their weight but also the move towards cashless transactions - leaving the Reserve Bank of India with a significant storage and distribution problem.

Banks around the country are also reluctant to accept coins owing to the fact that they have to allocate personnel to count them, as opposed to money counting machines for notes.

India’s central bank reportedly has more coins than it knows what to do with - around 9 billion coins as of late 2018 - according to the Indian Express, and storage costs are getting unfeasible as the RBI is running out of space to keep them.

Interestingly, the available space for coins fell significantly as the RBI started accumulating demonetised notes.

As a result of the storage crunch, the RBI is looking to outsource the distribution of coins to a private player and even export base coins to countries like Brazil and Sri Lanka.
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As far as privatisation of distribution goes, the government is reportedly assessing ways to increase the usage of coins in India and companies that can make the transportation and distribution of coins more cost-efficient.

The central bank is also dramatically reducing the number of coins it orders from the Security Printing & Minting Corporation of India Ltd (SPMCIL), a state-owned mint. It has only ordered 3.4 billion coins, which is reportedly a third of the SPMCIL’s production capacity.

Somewhat contradictorily, last month the government announced the introduction of a ₹20 coin, a full ten years after the ₹10 coin was released. The 12-edged coin will likely be expensive to produce.

While the RBI has traditionally encouraged the use of coins instead of small-value bank notes owing to the durability of coins, it’s reduced order from SPMCIL shows that it is changing with the times.


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