The Hindu : Banks in a tizzy over clean note fiat

Online edition of India's National Newspaper
Monday, Jun 23, 2003

Southern States

Southern States - Andhra Pradesh

Banks in a tizzy over clean note fiat

By Our Staff Reporter

KURNOOL June 22. The clean note policy being pushed vigorously by the Reserve Bank of India (RBI) has irked both bank staff and customers. The RBI directed all banks not to issue or receive stapled currency during transactions at banks. The RBI has threatened to withdraw the cash chest status to the branches if they did not comply with the directive with immediate effect. The RBI has deputed its teams to undertake random inspections.

The RBI is likely to convert its currency reserve in chest branches into loans if the branches did not de-staple the currency bundles. The banks have to pay interest on the RBI money deposited with their banks if not complied with the order. The bank personnel are currently engaged in removing the pins from currency bundles in their cash chests. The manager of a bank has said 18 personnel of his branch worked for a complete day and could sort 70,000 currency pieces into 70 bundles. The branch had 16,000 such bundles in its chest. The staff are not sure when they will be able to complete the process.

The clean note policy is likely to place additional work on the staff leading to long queues at cash counters. As per the existing policy, customers accept the pinned bundles without hesitation because the bank compensated for the shortage of currency notes if the bundle was brought intact. Similarly, the banks accept the stapled bundles from bulk customers without insisting on immediate counting because the shortfall or excess is adjusted later.

If banks start issuing unstapled bundles, the customer is required to count the bundles and satisfy himself before leaving the counter because the staff will not entertain the complaint later. The bank staff are grumbling against their senior managers for meekly accepting the directive of the RBI without demanding a solution for the problem.

Stapling of currency bundles is done only in India. The bank staff do admit that pinning is causing damage to the currency in the water mark region. If stapling is avoided, the life of currency is likely to be increased. But, the policy will cause inconvenience to customers and bank staff. The staff say it might be successful in the Western countries where people preferred financial transactions more through credit cards and cheques and minimised use of cash. Also, the trust between individuals and institutions or among individuals themselves was very high there.

On the other hand, Indians prefer cash transactions and even credit cards are discouraged by many business establishments. The bank staff apprehend that unprotected cash bundles are likely to create more problems. The use of counting machines appears to be a possible solution for the problem. The banks are required to install counting machines at each counter with display boards facing both bank employee and customers. Also, exclusive counting machine for customers is needed in every branch.

The mini-counting machine costs Rs. 2 lakhs. Banks have to invest a considerable amount on counting machines in future. The Chief Manager of SBI, Sivaprasad, has said their branch had implemented the RBI directive. The branch issued only un-stapled bundles to customers and insisted upon its customers too to supply only such bundles. The branch will reject the stapled bundles outright after a few days. He said the branch is going to get a comprehensive counting machine costing Rs. 15 lakhs, which will segregate and sort soiled notes, fake and good ones. The bank is investing Rs. 40 crores on installing counting machines.

Mr. Sivaprasad has said some practical difficulties are involved in implementing the policy at branch level. He hoped that some alternative arrangements could be developed after some time.

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