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The central government is exploring various ways to make smaller denomination currency notes (such as Rs 10, 20 and Rs 50) more widely available. The move is meant to address the persistent shortage that continues to plague everyday cash transactions almost a decade after demonetisation.
What do the new proposals include?
Live Mint has given this news quoting two officials associated with the discussions within the government. The proposals include a new kind of machine that will issue Rs 10, 20 and Rs 50 notes on demand. There is also a proposal for a ‘hybrid ATM’ which will be able to convert large notes into smaller notes and coins. Also, there is a plan to put pressure on the Central Bank (RBI) to print more small denomination notes.
Testing is going on on the pilot project
A prototype of a machine to issue low value notes is undergoing testing as part of a pilot project in Mumbai, the first official said. Once approved, the system is expected to be implemented nationally. These machines will be installed in high-traffic public places like traffic centres, markets, hospitals and government offices.
How will hybrid ATM work?
The second official explained that a hybrid ATM would combine the functionality of a traditional ATM and coin vending machine. These machines will allow users to convert large notes into small notes and coins in a single transaction. RBI has already tested the hybrid ATM model in a Bank of Baroda branch in Mumbai.
What is the need for these efforts?
The initiative comes amid growing public dissatisfaction over the shortage of small notes for everyday payments. This could reduce the hassles faced by shopkeepers who often face difficulty in exchanging Rs 500 notes, leading to delays in transactions or forced price negotiation. The move could benefit large sections of the population who are still dependent on cash, especially in urban informal areas and semi-urban areas, where acceptance of digital payments is uneven.
What do the statistics say?
RBI data shows that Rs 500 notes account for 41.2% of the volume of currency in circulation and 86% of the total value. In comparison, smaller denomination notes (₹ 2, 5, 10, 20 and ₹ 50) constitute about 38% of the total currency volume, but their share in total value is only 3.1%. The remaining portion is of 100 and 200 rupee notes.
What are the experts saying?
Devendra Pant, chief economist at Bharat Ratings & Research, said having more smaller notes in circulation would help with daily transactions, especially in rural areas where feature phones (which have less support for digital transactions) are still widely used. However, some believe machines alone are not the solution. A banking sector executive said machines alone could not solve the problem without adequate supplies. Printing, logistics and recycling of small notes will also have to be increased in parallel.
