COIN VENDING MACHINES

1. Context 

2. About the project

• The vending machines would dispense coins with the requisite amount being debited from the customer's account using United Payments Interface (UPI) instead of physical tendering of banknotes.
• Customers would be endowed with the option of withdrawing coins in required quantities and denominations.
• The central idea here is to ease the accessibility to coins.
• On the supply side of things stated that the situation concerning coins was "peculiar" with the supply being "very high".
• It is taking up a lot of storage space and it is not getting properly distributed. At the same time, there is demand in pockets.
• The proposed mechanism for coin dispensation would be a departure from the conventional machines which relied on banknotes for facilitating coin exchanges.
• Further, the proposed machine would eliminate the need for physical tendering of banknotes and their authentication.
• It was observed that the currency being fed into the machines (for coin exchange) was often found to be fake and could not be checked right then.
• Thus, the mandate is to eliminate the physical tendering of banknotes.
• The pilot is initially planned to be rolled out at 19 locations in 12 cities across the country.
• With a particular focus on ease and accessibility, the machines are intended to be installed at public places such as railway stations, shopping malls and marketplaces.

3. Significance of the coins in our ecosystem

• As per the latest RBI bulletin, the total value of circulation of rupee coins stood at ₹28, 857 crores as of December 30 last year.

• Coins of up to 50 paise are called "small coins" while those of one rupee and above are called "rupee coins".
• The figures above could be compared to the volume of digital payments until December 2022 which stood at approximately ₹ 9, 557.4 crores, as per the Digidhan Dashboard.
• The number is inclusive of mobile banking, internet banking, IMPS, BHIMUPI and NEFT among others.
• The reliance on UPI for dispensing coins is particularly noteworthy and it must be recalled that the payments interface for feature phones was launched in March last year.
• The apex regulator is also amid a pilot for the Central Bank Digital Currency (CBDC).

4. Is it going against the digital push?

• The proposal should not be viewed as a "zero-sum game of digital versus cash". The two can easily supplement each other.
• This should not be looked at from a very dogmatic point of view but rather a pragmatic one.
• If digitalisation is not solving a particular problem at this given point in time, then it is very much within RBI's purview to use other means available to achieve its ultimate objective which is to operate the currency system of the country.

For Prelims