Currency management is an area where the Reserve Bank of India (RBI) stumbles in the implementation of its own customer service policies. The aam aadmi has learnt to live with RBI’s indifference to soiled, mutilated and even dilapidated currency notes. The less said about the coins, the better — coins of the same denomination come in multiple sizes, designs and weight.
Currency management is one of the most important functions of the RBI. It has the responsibility for currency issuance and distribution, for which it has set up regional offices in most state capitals. It is obliged to ensure that only good quality notes remain in public circulation. Torn, mutilated, defaced or badly soiled notes cannot be reissued for circulation.
Until a few years ago, the RBI used to manage a large number of public counters in its regional offices, where people could freely walk in to exchange mutilated notes, or get notes and/or coins of desired denominations as permitted by its statute. But the RBI has gradually phased out its own public counters and instead started entrusting this function to both public sector and private banks as its agents.
It was a noble idea as this service to the public was to be made available at as many locations as possible. People would no more be required to go to the limited RBI locations for this purpose. However, as is often the case, good ideas remain good on paper. Ever since the RBI began to outsource this function, it appears to also have abdicated the responsibility of maintaining quality currency as there is a perennial shortage of them in the country.
Private sector banks — and even public ones now —work for profit. They believe the customer must pay for any service. Since they cannot charge for exchanging notes, invariably they do not provide this service. Withdrawing non-re-issuable notes requires sorting of notes on an ongoing basis at every branch, which demands additional time and manpower. So the banks avoid performing this function as well.
The RBI’s claim that, as a regulator of the banking sector, it has been actively engaged in providing customer service in the banks is hollow. It is unclear why the RBI cannot discharge this function efficiently as it has done for decades. Outsourcing does not absolve you of the responsibility. The public should get both the options i.e. getting the facility of exchanging notes at the RBI and any bank branch. The RBI must also strengthen its oversight to ensure banks discharge their duty as desired.
(KL Khetarpaul is a former executive director at the RBI)
(The views expressed by the author are personal)