Context: RBI (Reserve Bank of India) is about to launch a pilot project to assess the functioning of a QR-code Based Coin Vending Machine (QCVM).

Key features

• The central theme of the project is to ease the accessibility to coins.

• Instead of physically presenting banknotes, vending machines would dispense coins with the necessary amount being deducted from the customer's account through the United Payments Interface (UPI).

• Customers would have the choice to withdraw coins in the necessary numbers and denominations.

• Implemented in: The pilot is initially planned to be rolled out at 19 locations in 12 cities across the country.

• The machines are intended to be installed in public places such as railway stations, shopping malls and marketplaces.

Need of the initiative

• 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 at that point of time.

Significance

• The proposed mechanism for coin dispensation would be a departure from the conventional machines which relied on banknotes for facilitating coin exchanges.

• It will eliminate the need for physical tendering of banknotes and their authentication.

Process of currency circulation in India

• The Reserve Bank of India (RBI) is India's largest monetary institution. RBI also prints new notes and circulates them across the country with the help of the Currency Chest which further redistributes these notes in the economy through ATMs and commercial banks.

• In India, the RBI does the job of printing all the notes except notes of one rupee, but the responsibility of minting coins of all denominations comes under the purview of the Finance Ministry.

• Here it is worth mentioning that Finance Ministry does not distribute the coins and one rupee notes in the economy. It is done by the RBI only.

• The most important work of the Reserve Bank of India (RBI) is to circulate new and old currency in the country.

• RBI collects the old currency through commercial banks and receives the accumulated cash from all the commercial banks.

• RBI does all these works with the help of currency chests.

• The establishment of Currency Chests or "currency vaults" has been done by the RBI for circulation of the banknotes in the economy.

• To open the Currency Chest, the RBI authorizes the selected branches of commercial banks.

• Bank notes are stored by RBI in these Currency Chests. Currency chest supplies banknotes to other bank branches situated in the nearby area.