mop up such notes from circulation. 17. to ensure that genuine banknotes alone are put into circulation, high priority is accorded to detection of counterfeit notes in the banking system. towards this end, banks have been directed to enhance the use of technology to re - align their cash management systems so as to ensure that cash receipts in the denominations of 100 and above are not put into recirculation without being machine processed for authenticity. banks have also been advised to put in place suitable systems to ensure that counterfeit notes detected are duly impounded and reported by following the prescribed procedure. e ) currency processing in india - trends in expenditure 18. the currency production costs in our country have been substantial over the years. we in rbi have incurred an expenditure of 23. 76 billion in 2010 – 11, 27. 36 billion in 2011 – 12 and 28. 72 billion in 2012 – 13 on this activity. the two note printing presses, brbnmpl and spmcil, exhibit an increasing trend in their overall expenses viz. 12. 22 billion, 13. 09 billion and 14. 23 billion in the case of the former and 26. 17 billion, 27. 88 billion and 32. 82 billion in the case of the latter during the last three years respectively, with the cost of paper and ink contributing significantly in the overall costs. additionally, rbi has incurred an expenditure of 5. 23 billion for acquisition, upgradation and overhaul of its 59 cvps machines and 28 sbs ( shredding and briquetting system ) machines employed for destruction of soiled notes. the road ahead & key messages 19. currency management offers significant business opportunities for the players as the cost of printing of banknotes is increasing every year due to the increasing demand for banknotes. as i mentioned earlier, this also enjoins certain amount of responsibility on the part of the vendors. it is expected from them that the products offered are of high quality and reliability and they strictly adhere to the agreed technical specifications. in this context, i wish to allude to the failure of the selected bidders in meeting the technical specifications of the plastic banknotes in 10 denomination that we are proposing to introduce on a trial basis in india, necessitating undertaking the exercise afresh, thereby delaying the process. the vendors are also expected to co - operate with the national governments and central banks to avoid production of counterfeits by developing country - specific security features and bringing about improvisation in raw materials like paper, ink

billion pieces valued at 168 billion. as the demand for notes and coins is subject to diverse socio - economic, behavioural and other often unpredictable factors, the task of forecasting demand for currency is a challenging task and can be subject to large variations. at present, the system poses considerable difficulties in capturing the structural and cyclical demands for currency and projecting demand with precision. i would, therefore, also take this opportunity to extend an invitation to the delegates present here to come forward and see if they can work with us for making accurate projections for the demand of banknotes and coins. 8. the other challenges in currency management relates to ensuring durability of banknotes, ensuring adequate supply of all denominations, improving operational efficiency in distribution of notes by controlling cost of handling, distribution and security in transit / storage, providing last mile connectivity at reasonable cost, ensuring equity in distribution and repositioning rbi as an upstream facilitator in the fresh note / coin supply chain, rather than as a retailer with limited reach. let me highlight the challenge associated with durability of the banknotes in india by giving some figures. we in india, withdraw more number of banknotes from circulation than the number of banknotes collectively produced by all countries taken together with the exception of china. in fact, we are constrained to withdraw over 75 % of all notes that we circulate every year as may be seen from the table below : 9. such massive withdrawal of banknotes from circulation not only means additional cost for printing of fresh notes but also additional requirement of various resources used in production of banknotes. in this context, it becomes imperative that efforts are made to enhance the durability of the banknotes so that not only the wastages are reduced, but also resources are utilized in a sustainable manner, thereby ensuring that the environmental footprint of our currency management operations is minimized. 10. mechanization of soiled note processing while augmenting capacity has also thrown up new challenges like ensuring standardization of machine parameters, slow progress in improvement in processing capacity by commercial banks and security risks on account of manual intervention. another challenge with the likely potential to evolve into a reputational risk for rbi is the shortage / “ perceived ” shortage of coins and the lack of understanding on the exact role of the central bank in its distribution. it needs to be understood that while the bis central bankers ’ speeches responsibility for issue of coins is that of the government of india ( goi ), rbi ’ s role