The Hindu Business Line : Gaining currency the sweet way!

The monetary authority, the Reserve Bank of India, may not have issued them. But for some years now, they have fulfilled at least some of the requirements of a currency – a store of value and used as a medium of exchange – at least one-way. And, they have come to be accepted as valid tender, even if a trifle reluctantly, by a large number of people.

Don’t believe it? Just walk into a pharmacy and buy medicines for, say, Rs 18.70. Chances are you won’t get your change of Rs 1.30 for your Rs 20 — but a couple of candies or a chocolate or two. Two-way acceptance is, however, still some distance away! Try offering chocolate bars or candies to buy a cool drink or medicine! The shopkeeper is unlikely to be amused.

There have been fluctuations in the availability of coins at different periods of time. In the recent past, there have been more of shortages. For the average customer, that is often reflected in not being able to get the small change due to him – simply because the shopkeeper himself is running short.

The shortages have happened partly because the intrinsic value of these coins has been on the rise due to rise in prices of metals such as copper and nickel. There is a group of operators that corners these coins, drains them from general circulation and melts them for their metallic content. The RBI has stopped production of coins with this metal alloy and switched to ferritic stainless steel for coins of Rs 2 denomination. But the problem continues because the steel is now diverted for the manufacture of razor blades!

Commission

Hit by shortage of Re 1 and Rs 2 denomination coins, the trading community shells out a 6 per cent commission for obtaining coins. That is, you pay Rs 100 in exchange for getting coins worth Rs 94. “While the Re 1 and Rs 2 coin-shortage has been acute for over three years now, the 5-rupee coin has also been turning scarce since January this year,” says Mr C.R. Bhaskaran, Secretary of the Maligai Merchants Association in Coimbatore. The association, he said, had sought the State Bank of India’s help for supply of coins.

‘artificial problem’

Mr F.R. Joseph, RBI’s Regional Director in Chennai, said the problem of coin shortage is an artificial one and is being experienced in different parts of the country. He said that the RBI is aware of the situation and is taking special steps on a war footing to infuse more coins through the banks before the festival season begins. He expressed confidence that the situation would become normal within the next few weeks.

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