Polymer-based Currency Notes – A welcome innovation, but are Banks ready?

 

Ten to fifteen years back, during my childhood, on the occasion of Vishu (a native festival in Keralam) my parents and grandparents used to give me a fresh 10 rupees or 100 rupees note (sometimes even larger denominations) as 'Kaineettam'. I, being a child, after receiving the same once folded the note in half to put it in my little pocket. Seeing this my grandfather came near me and said, ‘don't fold the currency note, it will create crease on the note and will damage the same.’

Since I was just a child then, I never gave it much thought. But to my grandfather, who was a banker, it was a disappointing sight.

A few years later, when I had grown a little older, his question struck me like lightning when someone handed me a fresh note folded in half. That day, a thought came to my mind: why can't we have a plastic-based note instead? It could help overcome at least three of the biggest problems associated with paper currency that are faced by the common man.

1.     The creases on the note due to folding.

2.     The unwanted love stories and phone numbers written all over the note, and

3.     The frequent damages due to mishandling the notes, like tearing, crumbling etc.

Few days back, while going through the newspaper, I read that RBI is rethinking to bring polymer-based currency notes, an idea which was shelved for more than a decade. My thoughts went back in time when I personally dreamed of such an initiative and how much changes it can make in real life.

But suddenly my thoughts drifted. This time I was not thinking about the advantages of polymer-based notes but, the hardship it will bring to the Banking personnel. As a banker, this time my concern directly went to the practical difficulties banks may face in a near time.

1.   In 2016 following the demonetization, Banks had to reprogram their ATMs and CRMs to adapt to the new dimension of notes, which were smaller in size compared to the previous ones. Further, recently, following the RBI notification, all banks are currently trying to acquaint their ATMs to dispense low denomination notes, such as 100 and 200. Now with the introduction of polymer notes all Banks need to do the same again resulting in huge operational cost. Apart from the software changes, testing and calibration of thousands of machines across the country will also consume considerable time and manpower.

2.   Educating the customers is another big hardship. Following the demonetization, it was really difficult with many customers, especially elders, to make them understand that the currency is genuine/ original. Employees at Branches had to go through difficult times to educate them. Similar awareness program may once again become necessary as many customers may initially hesitate to accept a plastic based note or may mistake it for a fake one due to its different look and feel.

3.     All currently used systems to detect soiled/ mutilated notes and identification of fake notes need to be upgraded to the changes implemented. Currency sorting machines, note authentication devices and other cash handling systems may require modifications so that they can correctly identify the new polymer notes without rejecting genuine currency.

4.  Training the staffs to identify fake/ mutilated notes is another area. Bank employees handling cash at branches, currency chests and cash counters will have to be trained on the new security features, the method of identifying counterfeit notes, and the procedure for handling damaged polymer notes, since the existing practices are going to be obsolete once the polymer notes come into circulation. Lets not forget that fraudsters are getting more and more creative every day and to keep up with them is really a big challenge.

5.     The transition also results in another base level change, which is the requirement of rewriting all the existing SOPs and Policies governing the currency operations. The current policies, SOPs, and Operational Guidelines are based on the MG New Series notes. Necessary modifications are thus required in those documents. Otherwise, it will result in operational chaos.

6.   Last but not the least, and apparently this one is the first thing going to happen. Which is the transition phase. Since in the initial phase both paper based and polymer notes will be used simultaneously, equipping the Bank employees to handle the transition phase both technologically as well as in terms of customer complaints is genuinely a burden to suffer. During this period, branches may face increased customer queries, operational confusion and additional workload, making the transition more challenging than the introduction of the new notes itself.

Back in my childhood, I might have thought only about the advantages of polymer-based currency. As a customer or consumer, I would have seen only the benefits it brings to me. But today, my professional perspective leads me to look beyond those advantages. Polymer currency notes are undoubtedly one of the most progressive steps in the financial sector, as they can significantly reduce currency wear and tear and the associated costs. However, the challenges involved in bringing them into the hands of the public, along with the operational difficulties—no matter how small or temporary they may seem to an outsider—also deserve equal recognition.