For representative purposes only. Photo Credit: Getty Images
the story So Far: RBI Governor Shaktikanta Das, during the last Monetary Policy Committee (MPC) address, had said that the apex banking regulator, in collaboration with banks, will undertake a pilot project to assess the functioning of QR-code based coin vending machines.
What is the project about?
In simple words, the vending machines will dispense coins with the requisite amount to be debited from the customer’s account using United Payments Interface (UPI) instead of physical tender of bank notes. The customers will be given the option to withdraw the coins in the required quantity and denomination. The central idea here is to make coins easy to access.
On the supply side of things, T. Rabi Shankar, deputy governor of the Reserve Bank of India (RBI), had said that the situation with regard to coins was “peculiar” and that the supply was “very high”. “It is taking up a lot of storage space and it is not getting distributed properly. At the same time, there is demand in pockets,” said the Lt Governor.
The proposed mechanism for coin dispensing would be a departure from traditional machines that relied on bank notes to facilitate the exchange of coins. In addition, the proposed machine will eliminate the need for physical tender of banknotes and their authentication. It was observed that the currency being inserted into the machines (for coin exchange) was often found to be counterfeit and could not be properly checked at that time. Thus, ordering the abolition of physical tender of banknotes. Initially the pilot is planned to be launched at 19 locations in 12 cities across the country. With a special focus on ease and accessibility, the machines are intended to be installed in public places such as railway stations, shopping malls and marketplaces.
Are coins important in our ecosystem?
According to the latest RBI bulletin, the total circulation value of rupee coins till December 30 last year was Rs 28,857 crore. This figure is an increase of 7.2% from the year-ago period. The circulation of small coins remained unchanged at ₹743 crore. For perspective, coins in India are issued in denominations of 50 paise, one rupee, two rupees, five rupees, ten rupees and twenty rupees. Coins up to 50 paise are called ‘small coins’ while coins of Re 1 and above are called ‘rupee coins’.
The above figures can be compared to the digital payment volume till December 2022, which was approximately ₹9,557.4 crore, according to the DigiDhan dashboard. This number includes mobile banking, internet banking, IMPS, BHIM-UPI and NEFT among others. The reliance on UPI for distribution of coins is particularly noteworthy and it must be recalled that the payment interface for feature phones was launched in March last year. The top regulator is also in the middle of a pilot for a Central Bank Digital Currency (CBDC).
Is it going against the digital push?
The proposal should not be seen as a “zero-sum game of digital versus cash”, according to Vipul Kharbanda, non-resident fellow at the Center for Internet and Society (CIS). Both can easily complement each other. “It should not be seen from a very dogmatic point of view but from a practical point of view. If digitization is not solving any particular problem at the moment, then it is within the purview of RBI to take steps to achieve its ultimate objective. use other means available to it, which is to operate the country’s currency system,” argues Mr Kharbanda.