Rupee notes in circulation are three times those of dollars, almost six times those of euros

MUMBAI: The US note, the most ubiquitous currency in the world and used in everything from drug transactions to legally accepted tender in multiple countries, falls short of the rupee when it comes to circulation figures. RBI Deputy Governor Shirish Chandra Murmu said there are three times as many rupee notes in circulation as US dollar notes and almost six times as many as euro notes. While the quantity 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 notes using polymer.“In recent years, we have produced between 28 and 30 billion banknotes a year in six denominations and have disposed of approximately 21 billion banknotes a year. As of today, there are 176 billion banknotes in circulation in India. By comparison, at the end of last year approximately 56 billion US dollar and 30 billion euro banknotes were in circulation,” Murmu said.Murmu said the comparison partly reflects India’s denomination mix, which skews toward lower-value notes and therefore requires more pieces to transact the same value. “Still, the volume gives an idea of ​​the scale of the logistics we manage every day,” he said in a keynote speech at a cash management conference organized by Bank Indonesia in Jakarta on August 13.The RBI projects foreign exchange 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 retire old and unfit banknotes.Cash has continued to grow despite the expansion of digital payments. “Currency in circulation continues to grow at double-digit rates even as the share of cash in individual transactions declines, thanks to the growing adoption of digital payments,” Murmu said, describing this as a “cash paradox” that makes future demand harder to predict.India produces between 28 billion and 30 billion banknotes annually through banknote paper mills, four currency printers and ink production units owned and controlled by the RBI and the government. The central bank’s Clean Banknote Policy, introduced in 1999, requires it to make good quality banknotes available to citizens and continually replace banknotes deemed unfit for circulation.The RBI distributes currency through its 19 regional offices and a network of currency counters operated by commercial and cooperative banks and government treasuries. Money also reaches the public through bank branches, more than 250,000 ATMs and cash dispensers, and millions of business correspondents, especially in rural areas and smaller cities.Money chests collect circulated bills, sort them, and send dirty or mutilated bills for disposal. The network handled the 2016 demonetisation exercise and the withdrawal of Rs 2,000 notes in 2023, 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 banknotes 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 their disposal.“Cash remains an important means of payment in the Indian economy, and preserving trust in it, through clean banknotes, secure logistics and a monetary ecosystem that people can trust, is critical to preserving monetary sovereignty itself,” Murmu said.