Introduction

Good afternoon, my fellow central bankers from around the globe. I congratulate Bank Indonesia for hosting this discussion on such a topical issue, and I thank them for the opportunity to present an Indian perspective on it.

Currency management is a core function of nearly every central bank represented in this room. In the previous decade, adoption of digital payments in India has been revolutionary to say the least, yet cash in circulation has not declined, especially in rural and semi-urban areas, among low-income groups, older populations, and small businesses.

I suspect several of you are managing a version of this same balancing act in your own jurisdictions. Today, I want to share how the Reserve Bank of India thinks about this challenge, and how we structure our currency management function to meet it.

Objective

Let me start with why this function exists at all. When the Reserve Bank of India was established in 1935, regulating the issue of banknotes was one of the principal reasons for its creation, and that mandate holds true today. It is enshrined in the preamble of the RBI Act, and it is what drives us to tightly manage the full currency ecosystem: planning, production, distribution, and disposal.

To understand why this is operationally demanding, consider the scale. India is the world's most populous nation, with an estimated population of 1.42 billion people, spread across the seventh-largest landmass in the world at approximately 3.28 million square kilometres. Some of that population lives in places that are hard to reach but must still be served regularly: mountainous and hilly terrain, sprawling deserts, and islands accessible only by sea.

That scale shows up directly in the numbers. Over the past few years, we have produced between 28 and 30 billion banknotes annually across six denominations, and disposed of roughly 21 billion pieces a year. As of today, 176 billion banknotes are in circulation in India. By comparison, roughly 56 billion US dollar bills and 30 billion euro banknotes were in circulation at the end of last year. One caveat, in fairness to the comparison: our count is driven partly by a denomination mix weighted toward lower-value notes, which naturally means more pieces change hands for the same value of transactions. Even so, the volume gives you a sense of the scale of the logistics we manage every day.

Planning and Production

Every year, we run a five-year forward projection of currency demand, built from two components. Transactional demand is estimated from expected changes in currency in circulation, driven by GDP growth, interest rates, food inflation, and the pace of digital payment adoption, etc. Replacement demand is different: it reflects the need to retire older notes and keep the notes in people's hands fit for use.

That second piece is governed by our Clean Note Policy, in place since 1999, which commits RBI to making good-quality banknotes available to every citizen, in the denomination and place of their choice. We have laid down clear quality parameters for banks to assess notes in circulation, and we continuously replace those assessed unfit.

On production, India has steadily built self-reliance into this chain. Our banknote paper mills, four currency printing presses, and ink production units are all owned and controlled by RBI and the Government of India. That indigenisation is what lets us sustain the 28 to 30 billion pieces currency notes with high security features we print each year, across six denominations.

Logistics and the Currency Chest Mechanism

Getting currency from our presses to every corner of India, and getting soiled notes back, is, as you can imagine, a serious logistical operation. We manage it through a decentralised structure built around two channels: 19 Regional Offices of RBI spread across the country, and a much larger network of Currency Chests operated by partner banks with distributed reach into every part of the country.

A Currency Chest (CC), is operated by a designated commercial bank, cooperative bank, or government treasury on RBI's behalf. It may be a standalone building or housed within a bank's premises, but the cash inside it remains RBI's property at all times. We license CCs only after evaluating a bank's financial strength, and we set technical requirements they must meet, including minimum processing capacity and enough certified note-sorting machines to process soiled notes and detect counterfeits.

Because the cash is RBI's, we monitor CC operations closely. Every withdrawal and deposit is reported in real time on our Central Cash Accounting System, and CCs go through periodic inspection and audit. When a bank deposits excess cash into a CC, we treat it as a remittance to RBI, reducing that bank's cash holdings. When it withdraws, that is treated as a withdrawal from RBI, increasing the bank's cash in hand.

This is also where the Clean Note Policy becomes operational. CCs put fresh banknotes and coins into circulation, pool circulated notes coming back from bank branches, sort them, and forward soiled or mutilated notes to RBI for eventual disposal, accounting for the roughly 21 billion pieces we retire each year. CCs also run periodic note-exchange and coin-distribution campaigns, and, under our Linkage Scheme, serve as the parent facility for a defined set of bank branches, meeting their daily cash needs and absorbing their end-of-day excess cash.

This network proved its worth during India's two major currency transitions in recent memory, the 2016 demonetisation exercise and the 2023 withdrawal of the ₹2000 note, when CCs served as the primary collection and redistribution points, ensuring both transitions were coordinated nationwide.

Last-Mile Distribution

From the CC network, currency reaches the public through four channels: directly through our 19 Regional Offices, a small share of the total; through bank branches; through more than 250,000 ATMs and cash dispensers operated by banks and third-party operators; and through millions of Business Correspondents, who carry much of this load in rural areas and smaller towns.

Coins

Coins follow a parallel path. Four government-owned mints handle minting, while RBI carries overall responsibility for putting coins into circulation and withdrawing them for eventual disposal. The planning, logistics, and distribution processes are similar to those for banknotes. India currently mints five coin denominations on a regular basis.

Challenges and the Way Forward

Let me turn to where we still have work to do, and I would guess several of these will sound familiar to many of you in this room.

First, the cash paradox. Currency in circulation continues to grow at double-digit rates even as cash's share of individual transactions declines, thanks to growing digital payment adoption. That combination makes future demand harder to predict, which complicates our planning for production and distribution capacity. If any of you have found a good way to model this tension, I would genuinely like to hear it during our discussion.

Second, note durability. We are exploring ways to extend the life of banknotes, including surface coatings on the substrate, and polymer notes for lower denominations.

Third, sustainability. We are working to reduce the carbon footprint of the cash cycle: optimising our distribution network for efficiency and moving up the value chain in how we dispose of banknote briquettes.

Conclusion

If there is one thing I want to leave you with, it is this: cash remains a significant mode of payment in the Indian economy, and preserving trust in it, through clean notes, secure logistics, and a currency ecosystem people can rely on, is central to preserving monetary sovereignty itself. That is a goal every one of us in this room shares, whatever mix of cash and digital payments our own economies settle into.

Forums like this one matter precisely because they let us learn from each other's practices rather than solve these problems in isolation. I look forward to your questions, and to comparing notes with all of you over the course of this discussion. Thank you, once again, to Bank Indonesia for hosting us and for the opportunity to share India's experience with currency management today.

Thank you all.