Private issues to beat small denomination shortage

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February 9, 2012 – Issuing small denominations costs, it costs very much, even so much that the production cost of a single coin is often higher than its face value. Thus, some governments are debating cheaper alternatives; others, as it seems, are no longer able to perform their task of providing the citizens with coins of the necessary denominations. India could be one of the latter.

There citizens get by with private money changers who provide the retailers with the necessary change; however it costs them a heavy premium. Hence one rupee coins worth 100 rupies cost 114 rupees, for two rupee coins worth 100 rupees one has to pay 115 rupees. Five rupee coins are rated even higher. For 20 pieces buyers are charged 118 rupees. However, during a festival prices even raise.

The Mandvi-Koliwad association, an organization of grocers is working on resolving these shortcomings distributing private small denominations of one and two rupee coins. Thus it is alleged that rupee coins worth 50,000 rupees have been minted yet, destined for circulation in southern Mumbai.

The Reserve Bank of India has promised a thorough investigation into this case. RBI Deputy Governor V. Chaturvedi said: “There is no shortage at any levels of any kind and we have sufficient stocks in our currency chests also.” When confronted with the facts Mr Chaturvedi was wondering where all the coins were going to.

This article informs of the private issues.

Here an Indian video clip shows images of the discussed coins.

Here you will find more news on the reaction of the Reserve Bank.

We informed you that many Indian small denominations disappear from circulation being melted into razor blades. You can read the article here.