When Mint­ing 1 Coins Was Cheaper

The Economic Times - - Money & Banking -

In the first few years of 1970s, the RBI had faced two prob­lems — wage cost for cur­rency note print­ing press work­ers and short­age of cur­rency note pa­pers. These two un­con­nected is­sues had forced the cen­tral bank to think in terms of in­tro­duc­ing one-ru­pee cur­rency notes. Circa 1973, RBI deputy gover­nor RK Se­shadri took up the mat­ter with the govern­ment, and later gover­nor S Ja­gan­nathan fol­lowed it up with fi­nance min­is­ter YB Cha­van and ad­vo­cated a change-over from one-ru­pee notes to one-ru­pee coins. RBI had de­cided to do this shift in a phased man­ner be­cause of two rea­sons. One, RBI was not too sure how the gen­eral pub­lic would take the change and, sec­ond, it was wor­ried about the cost of de­stroy­ing the spoiled notes. At a re­sult, the RBI had de­cided that one-ru­pee coins would be in­tro­duced slowly. The life of a one-ru­pee note was about six months on an aver­age, while the life of a cupron­ickel one-ru­pee coin was forty years! There­fore, us­ing a one-ru­pee note en­tailed recurring forex ex­pen­di­ture for im­port­ing the cur­rency note paper. The forex outgo on im­port of coinage metals was much lower. It was ex­pected that the im­port bill would not be higher than 1 crore, be­cause RBI was plan­ning to use the metal re­trieved by re­cy­cling cupron­ickel in the coins with­drawn from circulation. The mints were also ex­pected to ben­e­fit from long-term con­tract for nickel, if In­dia de­cided on a pro­gramme for mint­ing oneru­pee coins and or­dered nickel sup­plies ac­cord­ingly. There­fore, al­though there was a rise in the prices of coinage metals, RBI found that mint­ing one-ru­pee coins would still be eco­nom­i­cal. An im­prove­ment in the global sup­ply of cop­per has helped.

— At­madip Ray

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