India's Tryst with Change

If we comb through all the households in India, and dig out the 2s, 5s, 10s and 50s, we may be able to arrive at a potential rationale. But for the longest time for unknown reasons, there has been an apparent crisis of change in India. And no I don’t mean change in the RaGa ‘system’ sense :) I am referring to loose change (or ‘chhuta’).

In general, we Indians collectively have a (justified) level of distrust for transactions.  And one manifestation of this is in the barter of loose change. The scale has changed over time (from Rs 1s to Rs10 or Rs50s now), but the premise remains the same – ‘I don’t have change with me. You please provide the requisite change to complete the transaction’. Lack of change leads to friction in every transaction – leading to delays (modern retail), stress (toll booths), arguments (autos) and embarrassment (airlines). This can be distilled into this simple cycle:

Cycle of distrust: Nobody wants to let go of their change!

This behavious is something chronic and peculiar only to India. Since the country hasn’t yet moved majorly to plastic/online transactions, the lack of liquidity in micro transactions is puzzling. One good benchmark is Indonesia, where economic factors are similar to India. When seen through the lens of FMCG industry, the usage of cash is still high compared to plastic currency. But in all my visits to the country, lack of change never seems to appear as a problem.

If we look at factors impacting change in transactions, they are mainly # of customers per day as well as systems managing cash flow. So I’ve crudely split our interactions based on Volume of Transactions & Scale of Organization. A few examples are given below:

If type D is without change (low volume of transaction, not scaled up in size), I can understand if there are change issues. But for the other 3 quadrants (A,B and C), the situation is odd and requires intervention. We can bring about a positive transformation by modifying the systems in managing the transactions. And over time the distrust from customers would come down. It would be na├»ve to combat human behavior first, as it’s incredibly hard to move that at a macro level.

Big Scale organization: system improvement examples
Modern Retail: Have each payment counter start operations in the morning with change for Rs.1,000, instead of hoping that they’ll generate their cash flow along the way, or handing over melody toffee instead of change!
Toll Booths: Rationalize toll charges to be only in multiples of 5. This way the operators have to only deal with Rs. 5 coins.
Airlines: Enable and encourage in-flight transactions via plastic (credit / debit card) by removing any additional charges from the transaction. 

Small Scale Organization: 
I am not really sure how this can be sorted for these transactions (Autos, Kirana stores), since it’s in their favour if there is lack of change. For Kirana stores it leads to an increased purchase basket and for autos they usually pocket the balance amount.

What are your thoughts? 


  1. Well put Iyer! Working in the cash logistics industry, we have solutions existing to solvr a lot of these problems. Though, they come at a price. For example, a pack of 100 5 rupee coins will cost you 510 Rupees in the market. The problem is that most retail outlets big or small dont want to spend. They keep a very low working cap in the form of loose change - mainly from the income of the previous day. In toll booths it is different though, the pricing structure is dependent on the government since it includes service tax and what not. Here the government needs to be educated. Though a major driver behind the unwillingness of governments to change this is politics.

  2. *twitch*
    In the first graphic, the red and green arrows are not parallel
    In the second graphic, 'Dhobi' is italicized

  3. It was intentional :) *Dhobi* is a hindi word. And parallel arrows would have implied balance. I wanted imbalance (effect of too many management ppts..).

  4. Jason - Thanks. I didn't know there's a whole industry to support this!


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