Dear All,

There is likelihood of Indian currency notes being changed from paper to polymer ones.

Kindly read the following interesting article.


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Why put your money on plastic - ASHOK MALIK

Myles Curtis wants to make a lot of money for India—and he’s not being altruistic. Curtis is chairman of Securency, the polymer currency manufacturer headquartered just outside Melbourne and jointly owned by the Reserve Bank of Australia and Belgian plastics-pharma company UCB.

Securency has been eyeing India—where 40 billion notes are in circulation at any given time, the world’s largest such volume—for some time. Preliminary talks took place when the Australian Foreign Secretary was in India in March.

This past week, as part of its ‘‘ongoing engagement’’ of the Finance Ministry and the Reserve Bank, a Securency delegation was back in India. It is understood a detailed ‘‘discussion paper’’ is being readied and should be available to Indian authorities in ‘‘a few weeks’’.

Speaking to The Indian Express, Curtis was confident the change in government in New Delhi would not fundamentally alter India’s interest in polymer notes.

Australia began printing plastic notes in 1988. Since then Securency has spread its ambit to 23 countries—Bangladesh to Vietnam, Nepal to Mexico, and now Singapore. ‘‘A 24th country has just signed on,’’ said a Securency official, ‘‘but the name is confidential.”

Securency prints its notes on a polymer substrate called Guardian, which it has patented. ‘‘While polymer notes cost 1.5 to two times more than paper notes,’’ said Curtis, ‘‘they are more durable and difficult to counterfeit. Against a counterfeit rate of 68 per million for notes in Europe and 100 per million in the US, Australia has only nine counterfeit notes per million.’’

In India, where the velocity of money—the number of times it changes hands—is high, it is longevity that is emphasised. Low-denomination paper currency, such as the Rs 10 note, usually survives six months. Securency’s experience with polymer suggests a life of almost four years. As for higher denominations, Aus $50 notes issued in 1995 are still going strong.

Securency first spoke to RBI in 1999. Sample Rs 10 and Rs 100 polymer notes were produced but the idea was perhaps still too novel. About nine months ago, Securency presented its case afresh, pointing out that polymer notes did not get dirty, tear or crumple, were never rejected by teller machines—and were a huge cost saver.

The Australian firm quoted the example of Brazil’s 10 reais polymer notes, issued in April 2000 and roughly analogous to India’s Rs 10 note. ‘‘There are 250 million 10 reais polymer notes in circulation,’’ said a Securency official, ‘‘a Brazilian government study in 2003 calculated that in three years they had saved the central bank $17 million.’’ India issues seven billion Rs 10 notes a year. Just do the calculation.

Securency’s tentative offer to India includes a joint venture ‘‘with an Indian entity of the government’s choice’’ to produce the polymer substrate locally. Asked what sort of an investment by Securency this would entail, Curtis was evasive. ‘‘Maybe between $25-50 million.’’

On their part, Indian officials said: ‘‘The polymer technology is good but no final decision has been taken. These things take time.’’

Delay would appear perfectly explicable. The banknote industry has conservatism and secrecy written all over it. Change is unusual.

In the US—seen by some as ‘‘the final frontier for polymer notes’’—the dollar is printed on special paper, 75 per cent cotton and 25 per cent linen, supplied to the Federal Reserve by a family-run firm for the past 125 years.

Based in Dalton, Massachussetts, Crane and Company patented this paper in 1879. In 2003, it signed a four-year contract with the Treasury, agreeing to supply paper worth $336 million. The company’s chairman, Lansing E Crane, is one of America’s wealthiest men, even if few have heard of him.

For 50 years, free India printed its rupees on machines bought from De La Rue Giori, run by the Swiss family Giori and till recently said to control 90 per cent of the banknote printing business.

The Giori saga has an unfortunate Indian subtext. In December 1999, M Roberto Giori, eldest of the Giori brothers and company chairman, was among those hijacked to Kandahar. If the Taliban had figured out who this economy class passenger was, he would have been the uber hostage.

Giori never recovered, insiders say. In 2001, he sold his business to Koenig & Bauer, a German firm.

In the 1990s, India diversified. Turning away from De La Rue Giori, it bought machines from Japan’s Komori for the RBI’s new presses. That decision was taken when Manmohan Singh was finance minister. As PM, will he take the next leap to plastic? At Securency, they’re betting their polymer on it.

(The author travelled to Australia on the invitation of the Australian government’s Department of Foreign Affairs and Trade)


http://www.indianexpress.com/full_story.php?content_id=49039


Comments of all CDs are most welcome. Though I personally feel this is a welcome step if implemented.

Regards

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Manan

Hi Manan

The RBI has said No to this project for the present - rural acceptability and weather conditions in India.

Regards

SF

Incase you want more let me know i will dig up the study for you.

Hi SF

Thanks for this update.

Regards

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Manan