QR code-based Coin Vending Machine

What’s in today’s article?

• Why in News?
• News Summary: QR code-based Coin Vending Machine
• What is the project about?
• How different is the proposed mechanism for existing conventional machines?
• What is the rationale behind this move?
• Are coins significant in India’s payment ecosystem?
• Why critics are opposing this move?

Why in News?

• The Reserve Bank of India (RBI) is preparing a pilot project on QR code-based Coin Vending Machine (QCVM) in collaboration with a few leading banks.
• The pilot will be launched in 12 cities in the country
• This move is aimed at improving the distribution of coins among members of the public.

News Summary: QR code-based Coin Vending Machine

• In February 2023, after announcing the sixth consecutive repo rate hike, RBI governor also put forth RBI’s new pilot project-QR Code based Coin Vending Machine.

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What is the project about?

• 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 the option of withdrawing coins in required quantities and denominations. The central idea here is to ease the accessibility to coins.

How different is the proposed mechanism for existing conventional machines?

• 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.

What is the rationale behind this move?

• To improve the distribution of coins among the public
  • Unlike cash-based traditional Coin Vending Machine, the QCVM would eliminate the need for physical tendering of banknotes and their authentication.
  • Customers will also have the option to withdraw coins in the required quantity and denominations.
  • This will improve ease of accessibility of coin among public.
• Issue of fake currency in cash-based traditional Coin Vending Machine
  • Getting fake currency notes in cash-based traditional Coin vending machines led the Reserve Bank to announce the UPI-based alternative.
• To address the issue of storage place for coins
  • The RBI is saddled with a peculiar problem wherein the supply of coins is very high and it takes a lot of storage space.
  • However, despite huge demands, these coins are not properly distributed and many places are in the lurch of the coins. 

Are coins significant in India’s payment ecosystem?

• Coins in India are issued in denominations of 50 paise, one rupee, two rupees, five rupees, ten rupees and twenty rupees. 
• Coins of up to 50 paise are called ‘small coins’ while those of one rupee and above are called rupee coins.
• As per the latest RBI bulletin, the total value of circulation of rupee coins stood at ₹28,857 crore as of December 30, 2022.
  • The figure is an increase of 7.2% from the year-ago period.
• Circulation of small coins remained unchanged at ₹743 crore.

Why critics are opposing this move?

• Many critics have opposed the recent decision of RBI to launch QR code-based Coin Vending Machine. They claim that this move is against the digital push of the government.
• At a time, when the government is urging citizens to opt for digital payments, the current step is retrospective in nature.
• However, RBI has defended its move saying that the proposal should not be viewed as a zero-sum game of digital versus cash. The two can easily supplement each other.
• If digitalisation is not solving a particular problem at this given point of time, then it is very much within RBI’s purview to use other means available to achieve its ultimate objective that is to operate the currency system of the country.

Q1) What is UPI (Unified Payment Interface)?

Unified Payment Interface (UPI) is a popular mobile payment method that allows you to transfer funds from one bank account to the other, instantly and free of charge. Ever since its inception, UPI has made financial transactions much easier for account holders.

Q2) Who mints the coin in india?

The Government of India has the sole right to mint coins. The responsibility for coinage vests with the Government of India in terms of the Coinage Act, 1906 as amended from time to time. The designing and minting of coins in various denominations is also the responsibility of the Government of India.

Source: Explained | RBI’s new pilot project on coin vending machines | Indian Express | Business Standard