From soiled and mutilated notes to digital banking

COVER STORY: Tshewang Dorji, 38, is a serious collector of old Ngultrum notes and coins. Banknotes and coins are safely stored in a red box with old stamps and cards.

Given him by his grandparents, old silver and copper coins were his prized possession. Then he began to collect more old notes and coins.

Six years ago, Tshewang heard that banks were buying old banknotes. He decided to sell some of his collections but banks refused to buy. It was just a rumour.

“Instead of buying old notes, bank officials said that they’d rather destroy them,” said Tshewang. “I decided to keep them for myself so that my children and grandchildren can get to see them.”

Old and soiled notes that are still in circulation today

 

In 2006, Royal Monetary Authority launched Clean Note Policy to destroy old, dirty and mutilated banknotes. Old banknotes were mopped out of circulation and were replaced by clean, smooth and shiny notes. The policy banned the age-old practice of writing, scribbling, drawing, tearing, folding or stapling of banknotes. In the same year, new Nu 5, Nu 20 and Nu 50 notes were issued. The new notes were consigned by the De-La-Rue Currency, the Ngultrum printer in UK.

Rinzin Lhamu, director of the currency management with RMA, said the main objective of the policy is to ensure timely and adequate supply of clean and good quality currency notes to the commercial banks and to the public.

“To implement the policy, the RMA issued notifications to the public to avoid mutilation and defacement of currency notes,” Rinzin Lhamu said.

Whenever deposit is made, banks will sort out the money and quality of the notes will be checked. “Old and mutilated notes will be segregated and sent to the RMA to be destroyed,” said Rinzin Lhamu.

Soiled notes are those that have become dirty and limp due to use, and mutilated notes are those that are torn, disfigured or burnt. Soiled notes can be exchanged at the RMA at full value. Payment against the value of mutilated notes is made in accordance with the Note Refund Rules framed under the RMA Act.

The current Ngultrum notes has special features of double varnish coating that prevents soiling from dirt. This also minimises risk of counterfeiting and increases durability.

“The circulation of good clean notes reflects the efficiency of the central bank,” said Rinzin Lhamu.

However, despite RMA’s Clean Note Policy, one can still find mutilated and old notes in circulation. That, said Rinzin Lhamu, is because these notes failed to reach the central bank.

“If anyone finds such notes, he or she can bring them to bring to the RMA, including the notes that are burnt,” said Rinzin Lhamu. “Soiled and mutilated notes are then destroyed by shredding to maintain the quality of notes in circulation.”

The design and security features of banknotes and coins are proposed by the RMA. It also estimates the quantity of notes and coins of different denominations that the public will likely need.

“After getting an approval from the board, we invite tenders to renowned international security printing companies and mints,” an official said. Notes and coins received from the printers are stored in vaults and issued to the banks and public upon request.

Notes and coins returned from circulation by banks and the public are examined. Notes and coins that are fit for circulation are reissued.

Staring 1974 when monetary reform commenced with the issuance of first bank notes coinciding with Fourth Druk Gyalpo Jigme Singye Wangchuck’s coronation, about a total of 166M pieces have been shredded till date.

“This includes the old and mutilated banknotes, and also old banknotes that are out of circulation,” Rinzin Lham said.

The current banknotes in circulation are of cotton paper notes bearing the series number 2006 and hybrid substrate (cotton and polymer) for the notes bearing series number 2013.

The RMA prints various denominations of banknotes every three to five years depending on the demand by the public. In 2011, about 20M pieces of Nu 100 and Nu 5 were printed by RMA. These are the denominations that are in circulation today.

As a measure to promote cashless transactions, the Bank of Bhutan Limited (BoBL) introduced the point of sales (PoS) in 2010. Government agencies, corporate and business houses, hotels, handicraft and general shops have set up the PoS terminal.

BoBL has installed PoS terminal in about 338 different locations across the country, mostly in Thimphu and Paro.

BoBL officials said the main objective of setting up the PoS terminals is to promote cashless transactions, facilitate acceptance of payment through the use of Debit or Credit Cards issued by the foreign banks and to encourage people to use plastic cards.

Passang Norbu, BOBL’s head of PR and media, said that if people start paying through PoS terminal, circulation of old and mutilated notes can be reduced.

The owner of Tashi Yoedbar handicraft shop near the Clock Tower in Thimphu, Thinley Jamtsho, said that tourists from the west are the ones who use the PoS payment system.

“There are a few Indian tourists and locals who use it, but many are not aware about it,” he said. “Personally, I use the PoS payment system when I buy archery equipment because it’s convenient and I don’t have to pay in cash.”

Despite the convenience of not having to carry cash in hand, most business establishments are reluctant to use PoS for all payments, Passang Norbu said. “It’s difficult to change people’s habits of using card in place of cash.”

BOBL has also taken initiatives to digitalise banking system such as internet banking services, among others.

“Digital payments in developing country like ours can help boost economic growth and deliver wider benefits, including improving people’s access to financial services,” Passang Norbu said.

Digital payment is more efficient than cash payment. It also can reduce rate of corruption, reduce cost of social transfer payments, and offer new pathways into financial system for the disadvantaged.

“Our customers prefer to do business with us digitally. More and more of our interactions with our customers are now online,” Passang Norbu said.

A total of about 34,116 transactions were carried out through PoS last year; about 27,087 in 2013.

Namgay Wangchuk, 38, who has recently returned from pursuing his further studies from Australia, said: “It’s time that we started paying through the card system like the rest of the world which is not only safe but convenient.”

By Thinley Zangmo

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