A decision support system for the reserve bank of India to forecast currency requirements at currency chests

Abstract

This paper presents a case-study of the logistics management of currency notes by the Reserve Bank of India (RBI), the country's central bank. RBI has the responsibility of replenishing currency to various chests spread all over the country. The chests distribute currency to individual banks that serve the public. A chest is a receptacle that can hold huge volumes of currency and acts as an extended arm of the RBI. Currently, RBI makes replenishment decisions based on past record and on requests from individual chests. This has resulted in excess inventory at some chests and shortages at some others. In order to streamline this process, a decision support system (DSS) that can forecast currency requirements and suggest inventory (currency) levels has been developed. The DSS is embedded with multiple techniques and can select the technique that minimizes error in forecasting future currency requirements. These forecasts serve as a basis to determine inventory levels for individual chests. The DSS is currently being piloted in one state of India.