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Has India realised full potential of its paper currency?


Government paper currency was introduced in India in 1861. Some 160 years later, digital payments are gaining currency, and a central bank digital currency is around the corner. But paper currency is still here to stay. Notes in circulation will, in aggregate terms, soon cross Rs30 trillion and approach double pre-demonetisation level.

Physical currency is recognised by the poor and rich, in villages and metros. It is a country’s visiting card that can capture the spirit of a nation, inspire and motivate. But has India realised its full potential?

The 2020 International Association of Currency Affairs Award went to the central bank of the Solomon Islands for its strikingly beautiful five-dollar bill. Other finalists were Australia, the Bahamas, Europe (euro) and Oman. Compared with other countries, including our neighbours like Bhutan, Nepal, and Maldives, the Indian paper currency lags in capturing the country’s ethos, aspirations, and rich cultural heritage. The most recent changes after demonetisation were to colour scheme and size. But a radical rethink is required.

One, strong security features enhance confidence in the currency. Apart from using distinct paper and security features — hologram doorways, fluorescent images, perforated digits, rolling colour patches, shifting and reversing digits, and enhanced print quality, etc — RBI could develop customised features not available elsewhere.

Second, also contributing to public confidence is recognisability, including accessibility to the visually challenged. Prolonged multi-channel publicity is key to achieving this objective.

Third, functionality, which requires an uncluttered currency. In India, every word or phrase has a multiplier effect on space, as it requires translation into at least one other language. The guarantee clause — stating that a note is ‘guaranteed by the central government’ — was introduced while transitioning from British government notes to those of a new and privately owned Reserve Bank of India (RBI) that was nationalised in 1949. This clause has long outlived its utility.

The promissory clause — ‘I promise to pay the bearer the sum of….’ — is a vestige of an era when currency was convertible into a base metal. Convertibility is now history; we have a fiat currency. Many countries have dropped this clause. The euro does not have one. The US dollar declares ‘this note is legal tender for all debts, public and private’. An RBI proposal in the 1960s that both clauses be dropped was not accepted. The entire clause could now be dropped or replaced with a statement, ‘This note is legal tender for all debts in India’.

A third decluttering measure relates to languages. Notes before RBI was established had the denomination written in words and figures in the languages in use in British India. After independence, this was expressed in the official languages in the Eighth Schedule of the Constitution. Of the 22 official languages, Konkani and Nepali were the last two to enter the currency. The last four official languages — Bodo, Dogri, Maithili, and Santhali — have not followed for space constraints.

Given the constraints, all languages other than English and Hindi could be dropped and limited to microlettering. Alternatively, expression of denominations in words could be dropped as the public recognise notes by numbers, not by words.

Functionality also means having currency fit for ATMs and standard wallets. Less the need to fold notes, the longer their life. Which leads to the fourth principle of durability — resistant to tear, abrasion, crumpling, and soiling. A long-pending innovation is that of polymer notes. If these can be made free of animal fat, with a lower carbon footprint than paper currency, given their longer life, polymer notes should be the way forward. In the meantime, experimenting with other materials should continue.

As a fifth principle, the currency should represent the country, capture the imagination of its people, celebrate its rich diversity. Images of eminent persons, flora and fauna, and of inanimate objects are usually used in currencies. Indian currency notes have so far had only Mohandas Gandhi on its design. We could widen this currency pantheon by including the likes of Srinivasa Ramanujan, Jamshetji Tata, Jagdish Chandra Bose, CV Raman, Homi J Bhabha, Rabindranath Tagore, Premchand, Ustad Allauddin Khan, Uday Shankar and Dhyan Chand.

As for other images, why not go beyond conventional tropes and jaded palettes like having the Great Indian Bustard or a Malabar Hornbill? Or a still from a Satyajit Ray film, a Jaimini Roy painting? The possibilities are endless.

Note design should be contemporary and incorporate principles of universal design that a younger population can relate to. One such innovation could be vertical notes with a portrait orientation, as in the Swiss franc or Argentinian peso. This makes sense, as that is how one removes currency from one’s wallet. A second innovation could be the use of striking colour contrast, as in Swiss francs. Removing the white frame around the notes also make them stand out.

The practice of GoI designing the note, and getting the RBI central board to recommend it for approval needs to end. Central bank currency should be the central bank’s responsibility from concept and design to delivery. While the government should be consulted, RBI is better positioned to develop the best of currency designs interacting with other central banks, and global currency-related organisations.

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