In Calcutta, India there are thousands of people waiting in line to buy sacks of coins for higher than their face value. Suddenly the city of 14 million has been drained of its change, forcing businesses and consumers alike to scramble for ways to continue doing business.
In early June, the shortage forced the Reserve Bank of India to flood the city with millions of coins. According to CNN, the bank has distributed “nearly 5 million rupees ($121,950) worth of coins, including one million on Thursday alone”, but it has done little to meet the demand.
Make-shifts have been set up around the city by people who saw the need and the profit potential. Most of these new entrepreneurs are selling sacks of 100 rupees for 120 rupees, but local shop owners say it’s hurting their business.
Some business owners have devised ways around the coin shortage by offering other services or products in exchange for the full note. For consumers though, this means they are still spending their entire bank note and they’re not happy about it. Left with little choice, many business owners have gone to the streets begging the beggars for their spare change in return for a bank note.
Though the coin shortage has been labeled “mysterious”, it is really no mystery to the Reserve Bank of India who issues Indian currency as dictated by the Indian government. This is not the first time India has had a coin shortage and it will probably not be the last.
India’s population of 1.2 billion people still relies heavily on cash currency. Technologies such as credit and debit cards are not widely used and society’s preference is for bank notes.
Though India achieved a 9.4% increase in GDP as of March, the Indian government has been trying every trick in the book to lower their inflation rates. Inflation is so high in India, securing a home to rent can mean as much as a ten month deposit in some areas of the country.
As economies fluctuate, so do the values of metals. CNN reports that the Calcutta Bank Treasurer, Nilanjan Saha, had received information of possible traders who are melting the coins down because the metal is worth more than the face value of the coin. One report stated the coins were being made into razor blades.
The Reserve Bank of India has placed nearly 4000 coin depots around the country in addition to creating and placing coin dispensing machines and dedicated coin windows at bank offices. In addition to providing education about coin facilities and money recycling, the bank issued a plea to their public:
“Members of the public are requested to avoid holding on to coins and instead, use them freely for transactions to ensure that there is a smooth circulation of coins.”
“The mission cannot be successful without unstinting support from the people at large and the various voluntary agencies.”
The Reserve Bank of India
“City asks beggars for small change”- CNN.com report
“Finding a place in India” – Indax.com