The Reserve Bank of India (RBI) plays a pivotal role in regulating and managing currency circulation in the country. In its endeavor to ensure the availability of clean notes and coins, the RBI has introduced the Currency Distribution & Exchange Scheme (CDES), outlined in its Master Direction. This article delves into the framework, incentives, and operational aspects of the CDES aimed at enhancing customer service across bank branches.
Detailed Analysis:
1. Framework Overview: The CDES is structured to incentivize banks to improve customer service related to currency exchange and distribution. It emphasizes the objectives of the Clean Note Policy, striving for efficient currency management nationwide. Through this scheme, the RBI encourages banks to set up infrastructure conducive to seamless currency exchange operations.
2. Incentives Offered: The incentives under CDES encompass various aspects of currency management:
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- Opening and maintaining Currency Chests (CCs) in underbanked regions: Banks are eligible for reimbursement of capital and revenue costs, with special provisions for the North Eastern region.
- Exchange of soiled notes and adjudication of mutilated notes: Banks receive financial incentives per packet or per piece for these services.
- Distribution of coins: Banks are rewarded per bag for coin distribution, with additional incentives for rural and semi-urban areas.
- Cash deposit by non-chest branches: Service charges are levied based on the type of CC for cash deposits by non-chest branches under the Linkage scheme.
3. Operational Instructions: The RBI provides clear operational guidelines for disbursing incentives:
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- Incentives are paid based on actual transactions and deposits.
- The distribution of coins is subject to verification by RBI Regional Offices.
- Currency chest branches distribute incentives to linked branches/chests.
Conclusion: The Master Direction on Currency Distribution & Exchange Scheme (CDES) underscores the RBI’s commitment to efficient currency management and customer service. By incentivizing banks to enhance infrastructure and services related to currency exchange and distribution, the RBI aims to promote a robust financial ecosystem. Adherence to the guidelines outlined in the CDES will not only facilitate smoother currency operations but also contribute to the overarching goal of ensuring a clean and reliable currency supply across the nation.
Reserve Bank of India
RBI/DCM/2024-25/113
DCM (CC) No.G-3/03.41.01/2024-25
April 1, 2024
The Chairman/Managing Director/Chief Executive Officers
All banks
Madam / Dear Sir
Master Direction on Framework of incentives for Currency Distribution & Exchange Scheme for bank branches including currency chests
In terms of the Preamble to and Section 45 of the RBI Act, 1934 and Section 35 A of the Banking Regulation Act, 1949; Reserve Bank of India issues guidelines / instructions for realising the objectives of Clean Note Policy as part of currency management. With a view to furthering these objectives, the Bank has formulated a framework of incentives titled Currency Distribution and Exchange Scheme (CDES) to encourage all the bank branches to provide better customer services to the members of public.
2. The enclosed Master Direction incorporates updated guidelines / circulars on the subject.
Yours faithfully,
(Sanjeev Prakash)
Chief General Manager
Encl: As above
Annex
Master Direction on Framework of Incentives for “Currency Distribution & Exchange Scheme (CDES)” for bank branches including currency chests
1. The framework of incentives, titled Currency Distribution & Exchange Scheme (CDES) for bank branches including Currency Chests (CCs), based on performance in rendering customer service to the members of public has been formulated to encourage all the bank branches to provide better customer service to the members of public keeping in view the objectives of Clean Note Policy.
2. Incentives
As per the scheme, banks are eligible for the following financial incentives/service charges for setting up requisite infrastructure and facilitating exchange/distribution of notes and coins:
| Sr. No. | Nature of Service | Particulars of Incentives/Service Charges |
| i | Opening of and maintaining CCs at centres having population of less than 1 lakh, in underbanked states | a. Capital Cost: Reimbursement of 50% of capital expenditure (inclusive of all taxes) subject to a ceiling of Rs. 50 lakh per CC. In the North Eastern region, up to 100% of capital expenditure is eligible for reimbursement subject to the ceiling of Rs. 50 lakh (inclusive of all taxes).
b. Revenue cost: Reimbursement of 50% of revenue expenditure (inclusive of all taxes) for the first 3 years. In the North Eastern region, 50% of revenue expenditure (inclusive of all taxes) is eligible for reimbursement for the first 5 years. |
| ii | Exchange of soiled notes / adjudication of mutilated notes over the counter at bank branches. | a. Exchange of soiled notes – Rs. 2/- per packet for exchange of soiled notes in the denominations up to Rs. 50/- and below
b. Adjudication of mutilated notes – Rs. 2/- per piece |
| iii | Distribution of coins | a. Rs. 65/- per bag1 for distribution of coins.
b. An additional incentive of Rs. 10/- per bag shall be paid for coin distribution in rural and semi-urban areas on the submission of a Concurrent Auditor (CA) certificate to this effect. |
| iv | Cash deposit by non-chest branches under Linkage scheme with CCs | Service charge to be levied by the CC on the non-chest branches
a. Large modern CCs2– Rs. 8/- per 100 pieces b. Other CCs – Rs. 5/- per 100 pieces |
3. Other operational instructions on payment of performance-based incentives
i. The incentives shall be paid on the soiled notes actually received in the Issue Office of the RBI.
ii. Incentive shall be paid in respect of the adjudicated notes received along with the soiled note remittances or sent separately by registered / insured post in a sealed cover to the RBI.
iii. The incentive for distribution of coins shall be paid on the basis of net withdrawal from the currency chest.
iv. Banks do not need to submit a separate claim for the incentives. Currency chest branch shall pass on the incentive to the linked branches/chests for the soiled notes deposited / coins distributed/ mutilated notes adjudicated by them on pro-rata basis.
v. The distribution of coins shall be verified by RBI Regional Offices through inspection of currency chest / incognito visits to branches, etc.
vi. Instructions issued vide circular DCM(CC) No.97527/03.41.01/2021-22 dated August 27, 2021 remain unchanged.
1 For incentive calculation, 5000 pieces of 50 paise coins; 2500 pieces of Rs. 1, Rs. 2 or rs. 5 coins; 2000 pieces of Rs. 10 or Rs. 20 coins would be deemed to constitute one bag.
2 Large modern CCs are those CCs which fulfil the Minimum Standards for a CC as detailed in the circular RBI/2018-19/166 DCM(CC) No. 2842/03.39.01/2018-19 dated April 08, 2019.
