Currency is a small percentage of capital that regulates within the country. It contributes to inflation calculations and other economic aspects. Printed currency enters into the India market, according RBI’s norms. Only RBI controls the amount of money to be printed, and when it is going to be printed. There are many factors the affect the printing of currency. Let’s have a look on them and conclude, how it is printed.
The amount of money, is going to be printed, totally depends upon inflation. Now, the concept of inflation is really complex and long, but let me simplify it for you.
Inflation is the record of percentage increase in the cost of a service or an item. It is opposite of deflation. Basically, if inflation increases, you have to pay more money for the same service than earlier you were paying, it could be a loan, an item, or a service. Other way to state it is, for the same amount of money, you’re getting less amount of that service, or an item.
Now, if inflation increases, use of physical money increases, hence, RBI has to print more money according to the percentage increase in inflation. So RBI conducts various calculations according to the inflation rate to determine how much money should be printed.
Another factor that affects the amount is GDP. The government prints money of the same value, as the value ithas gained into their economy or in a simple way GDP. Increase in GDP directly increases the process of printing more money, of the same value. The point worth noting is, the government gives people the same amount of physical currency, as the value it is getting in return from GDP and inflation.
How it is Printed?
Now you know, exactly how much money you need to print. Now let’s focus on the process of printing.
The currency notes that are currently in circulations are of Rs.5, 10, 20, 50, 100, 500 and 1000. RBI is authorized to print 5000 and 10000 rupees notes, in fact, RBI can print any amount of note, upto the limit of 10000. RBI has to notify government before taking the step of informing new note in the market. Basically, every action of RBI requires an approval of government.
Now comes the issuing part, RBI has a separate department called issue department. This department’s assets, liabilities and capital are completely kept separate from the banking department of the country. The management process of the currency, such as accounting and other calculations are carried out at “Department of Currency Management” located at Central Office Mumbai. In India, there are 19 Issue offices. RBI authorizes selected branches of Banks to establish Currency Chests and Coin Deposits. At present there is a network of 4281 Currency Chests and 4044 Small Coin Deposits.
Now the question arises what are currency chest and coin deposits. After the money is printed, the RBI has to store it somewhere, in order to make a stock, so whenever in need, the money can be used. So for that purpose, they have currency chest and coin deposits.
Related Article:Top 10 Private Sector Banks In India
Where it is printed?
There is only one department, that deals with printing of the money, known as The Security Printing and Minting Corporation of India Limited (SPMCIL). Government of India has full control over the department. The printing presses are located at Nasik (Maharashtra) and Dewas (Madhya Pradesh).
Apart from that, the Bharatiya Reserve Bank Note Mudran Pvt. Ltd. (BRBNMPL), a wholly owned subsidiary department of the Reserve Bank of India, also has set up printing presses. The presses of BRBNMPL are located at Mysore in Karnataka and Salboni in West Bengal. Security Printing and Minting Corporation of India Limited (SPMCIL) has 4 mints for coin production located at Mumbai, Noida, Kolkata and Hyderabad.
How it is Entered into the Market?
Once the money is printed, now RBI sends the money to various banks, which need it to convert artificial money to physical money, through customers. RBI can directly send this money to banks, in form of debt, or in exchange of their assets or capital investments. The procedure is however kept secret and the money distribution is carried out any very secure way. The distribution map is only exclusive to the RBI and is very secure procedure. By introducing money through banks, new notes get into circulation and people spread it for services and goods.
So, in a start, the amount is determined, and the whole process is carried out as mentioned above. This whole process is simplified form of what happens in real world. However, if you clearly understood this, you can go deeper by studying various aspects. This article briefly tells about how printed money enters the Indian market. I hope you understood it, and now have better idea of how economy works.