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How currency and coins are circulated in the Indian economy by the RBI

Hemant Singh

The Reserve Bank of India (RBI) is India's largest monetary institution. RBI also prints new notes and circulates them across the country with the help of Currency Chest which further redistributes these notes in the economy through ATMs and commercial banks.
In India, the RBI does the job of printing all the notes except notes of one rupee, but the responsibility of minting the coins of all denomination comes under the purview of Finance Ministry. Here it is worth to mention that Finance Ministry does not distributes the coins and one rupee notes in the economy. It is done by the RBI only.
The most important work of the Reserve Bank of India (RBI) is to circulate new and old currency in the country. RBI collects the old currency through commercial banks and receives the accumulated cash from all the commercial banks.RBI does all these works with the help of the currency chests.
What is Currency Chest?
The establishment of Currency Chests or "currency vault" has been done by the RBI for circulation of the banknotes in the economy. To open the Currency Chest, the RBI authorizes the selected branches of commercial banks. Bank notes are stored by RBI in these Currency Chests. Currency chest supplies banknotes to other bank branches situated in the nearby area.
Notes and Coins in circulation in India (Rupees in Billion)

What does Currency Chest work?
Currently, the Reserve Bank of India has around 4211 Currency Chests to maintain currency circulation across the country. Apart from this, it has 3990 depots to handle coins. These chests are spread all over the country. These Currency Chests also holds the excess cash deposited by the commercial banks.
The Currency Chests had played a big role during the demonetisation in India. All the banned notes were deposited in these Currency Chests during the demonetisation. In addition to this all the new currency notes printed by the RBI also first reached to these Currency Chests and later on circulated to the commercial banks and ATMs, even today, similar procedure is followed by the RBI in the circulation of the new notes.

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Where are Currency Chests located in India?

Who is contributing in the establishment of a Currency Chest?
In order to establish Currency Chests across the country, the Reserve Bank takes the support of the State Bank of India. Apart from this, all nationalized banks, 6 associate banks, some selected private sector banks, 1 foreign bank, 1 cooperative bank and 1 rural bank are also included in this work. This work is done by the Reserve Bank of India with the help of 18 branches or issue offices spread all over the country.
How currency is conveyed to Currency Chests
After printing of currency in four government offices, it is delivered directly to the Reserve Bank's 18 Issue Office. New notes are conveyed to the issue office with the help of the Carrier Aircraft, Airforce, Indian railways and assistance of State Police and Railway Police Force is also taken.
Many times larger container vehicles are rented from private sector for large currency transfer. This whole process is kept very confidential. According to the requirement, army's help is also taken in the sensitive areas. Ultimately the currency is delivered to the Currency Chests being run by the selected commercial banks under the supervision of the Reserve Bank of India.
(Security personal delivering the currency at a Currency Chest situated in State Bank branch)

image source:Business Line
The Currency Chests are established on crucial places across the country so that these chests can provide money to the commercial banks as per the requirement. These Currency Chests fulfill the day to day demand of cash of the branches of all commercial banks situated nearby the Currency Chest.
Therefore, it can be said that the Currency Chests are playing an important role in the economic development of the country by helping the Reserve Bank in easily circulation of the currency in the country.

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