“If the soiled notes exceed a certain percentage, such as 60% of the chest space, RBI may take a policy decision to increase the cash holding limit of the currency chest,” the banker said.
The person said that the regional offices of the RBI may give approval to increase the cash holding limit. The central bank has launched a ‘Clean Note Policy’, which covers the retrieval and processing of bank note Automatically destroy soiled notes received from currency chests.
According to RBI’s annual report, there was an above average increase in banknotes in circulation in 2020-21 mainly due to the precautionary holding of cash by the public due to the COVID-19 pandemic.
According to the report, the value and quantity of banknotes in circulation increased by 16.8% and 7.2% respectively during 2020-21. In terms of value, the Rs 500 and Rs 2,000 banknotes accounted for 85.7% of the total value of banknotes in circulation as on March 31, 2021, from 83.4% a year ago. The report further said that the pandemic has also affected the disposal of soiled banknotes, though it was intensified during the latter half of 2020-21.
“Despite the efforts, the entire year witnessed a decline of 32% in the disposal of soiled notes as compared to the previous year,” the report said. At present, there are 3,054 currency chests, of which 55% are with the State Bank of India (SBI).
“We anticipate that as the informal economy picks up pace, as the country emerges from the shadow of the COVID-19 pandemic, there will be more demand for currency notes,” said a second bank executive.
Some industry participants suggest that the central bank should comprehensively update its currency vault policy. “They should allow private third party non-banking entities to operate currency chests for greater cost efficiency,” said Rituraj Sinha, group MD, private security firm SIS India.
RBI is in the process of introducing Varnished Bank Notes in the denomination of Rs 100 on a field trial basis with an aim to extend the life of the banknotes.