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The thick Rs 5 coins were discontinued by the RBI due to economic concerns. The metal value of these coins exceeded their face value and hence they were widely smuggled to a neighbouring country
There are currently two types of five-rupee coins in circulation- one made of brass and the other is composed of a thicker metal. (News18 Gujarati)
The Reserve Bank of India (RBI) is responsible for all monetary policy decisions in India. This includes decisions regarding the quantity of money to print or create. However, the RBI operates under the guidance of the government. The government provides instructions to the RBI, which then takes steps to issue currency or coins.
Even if a coin or note has been discontinued or is in the process of being issued, the RBI still requires permission from the central government to ban it. Currently, coins from one rupee to 20 rupees are in circulation in India. There are reports that coins of 30 and 50 rupees have been issued recently.
Currently, news circulating online claims that circulation of the five-rupee coin will be cancelled. Let’s delve into this news to uncover more information.
There are currently two types of five-rupee coins in circulation in the country. One is made of brass, while the other is composed of a thicker metal. However, the prevalence of the thicker coin has recently decreased.
Currently, neither the central government nor the Reserve Bank of India issues thick metal coins of five rupees. Only brass coins are usually found in the market.
A significant reason behind the discontinuation of the thick five-rupee coins is that the metal used in their manufacture could be melted down and made into four to five blades, which cost more than Rs 5. This economic factor led the government and the Reserve Bank of India to discontinue these five-rupee coins.
According to a rule, if the cost of producing currency exceeds its face value, those coins or notes are removed from circulation. For instance, if an individual melts a 5 rupee coin to create 5 blades, subsequently selling them for Rs 2 each (earning a total of Rs 10), the intrinsic value of the metal in the coin surpasses its monetary worth. It is for this reason, among others, that the RBI chose to halt the production of specific coins, such as the thicker five-rupee coin.
Another reason why the RBI discontinued the old five-rupee coin was illegal smuggling to Bangladesh. These old five-rupee coins were made of metals and that too in large quantities. Hence, smugglers used to export these coins to Bangladesh. This drastically reduced the circulation of the coin in our country.
In Bangladesh, these coins were melted down and shaped like razor blades. This single coin could be used to make six blades, each of which could be purchased for Rs 2.
When the government learned about this matter, they immediately altered the appearance and metal content of the coin. The RBI made the five-rupee coins thinner than the previous version. In addition, the central bank blended the metal with some cheaper elements in the market. Thus, even if these five-rupee coins were exported, the smuggler could not manufacture razor blades.
