RBI Governor had stated during the last Monetary Policy Committee (MPC) address that the apex banking regulator, in collaboration with banks, would be launching a pilot project to assess the functioning of a QR-code based coin vending machine.
GS III: Indian Economy
Dimensions of the Article:
- What is the project about?
- Are coins significant in our ecosystem?
What is the project about?
- The Reserve Bank of India (RBI) has proposed a project to introduce vending machines that dispense coins to customers.
- The main objective of this project is to ease accessibility to coins by allowing customers to withdraw coins in required quantities and denominations without the need for physical tendering of banknotes.
Coin Supply Situation:
- Deputy Governor at the Reserve Bank of India (RBI), has highlighted the peculiar situation with respect to coins.
- There is a very high supply of coins, taking up a lot of storage space, and not getting distributed properly.
- At the same time, there is demand in specific pockets.
- The proposed mechanism for coin dispensation is a departure from conventional machines that rely on banknotes for facilitating coin exchanges.
- The new machines will eliminate the need for physical tendering of banknotes and their authentication, which often results in fake currency being fed into the machines.
- Instead, the requisite amount will be debited from the customer’s account using United Payments Interface (UPI).
- The pilot for this project is initially planned to be rolled out at 19 locations in 12 cities across the country.
- The machines will be installed at public places such as railway stations, shopping malls, and marketplaces with a particular focus on ease and accessibility for customers.
Are coins significant in our ecosystem?
- As per the latest RBI bulletin, the total value of circulation of rupee coins in India was ₹28,857 crore as of December 2022, which is an increase of 7.2% from the year-ago period.
- Coins in India are issued in denominations of 50 paise, one rupee, two rupees, five rupees, ten rupees, and twenty rupees.
- Coins of up to 50 paise are called ‘small coins,’ while those of one rupee and above are called ‘rupee coins.’
Comparison with Digital Payments:
- The total value of digital payments until December 2022 stood at approximately ₹9,557.4 crore, as per the Digidhan Dashboard.
- This figure is inclusive of mobile banking, internet banking, IMPS, BHIM-UPI, and NEFT, among others.
Significance of UPI:
- The proposed mechanism for dispensing coins through vending machines relies on United Payments Interface (UPI) for debiting the required amount from the customer’s account.
- The reliance on UPI for dispensing coins is noteworthy, considering the payments interface for feature phones was launched only in March 2021.
- The RBI is piloting the Central Bank Digital Currency (CBDC), which could potentially transform the way transactions are conducted.
-Source: The Hindu