Master Direction on “Currency Distribution & Exchange Scheme (CDES)” for bank branches including currency chests based on performance in rendering customer service to members of public

## Report on Reserve Bank of India's Master Direction on Currency Distribution & Exchange Scheme (CDES) **1. Executive Summary:** This report analyzes the Reserve Bank of India's (RBI) Master Direction on the Currency Distribution Exchange Scheme (CDES) for bank branches, including currency chests. The core purpose of the CDES, as derived from the text, is to ensure better customer service at bank branches regarding the exchange of notes and coins, aligning with the Clean Note Policy. The key finding is that the scheme provides financial incentives to banks for opening and maintaining currency chests in under-banked areas, exchanging soiled/mutilated notes, and distributing coins. **2. Introduction:** The purpose of this report is to provide an informative overview of the Reserve Bank of India's (RBI) Master Direction on the Currency Distribution Exchange Scheme (CDES), based solely on the provided policy text. This report aims to clarify the policy's objectives, key provisions, target audience, and expected outcomes. **3. Policy Overview:** * This is a *new* policy direction, establishing the Currency Distribution Exchange Scheme (CDES). * **Core Objective(s):** To ensure all bank branches provide better customer service to the public concerning the exchange of notes and coins, in accordance with the Clean Note Policy. **4. Background and Rationale:** As a new policy, the CDES appears to address the need for improved currency distribution and exchange services at bank branches. The text suggests that the RBI aims to incentivize banks to actively participate in maintaining a clean note supply and facilitating easy exchange for the public. The emphasis on "better customer service" indicates a potential issue with the existing level of service. **5. Key Provisions / Changes:** As this is a new policy, the following details the main components and actions mandated by the provided text: * **Establishment of the Currency Distribution and Exchange Scheme (CDES):** The scheme provides financial incentives for banks to improve currency-related services. * **Incentives for Opening and Maintaining Currency Chests:** * **Capital Cost Reimbursement:** Banks are eligible for reimbursement of 50% of capital expenditure, capped at ₹50 lakh, for establishing currency chests in centres with a population less than 1 lakh in under-banked states. This reimbursement increases to 100% in the North Eastern region, subject to the same ceiling. * **Revenue Cost Reimbursement:** Banks receive 50% reimbursement of revenue expenditure for the first 3 years, extended to 5 years in the North Eastern region. * **Incentives for Exchange of Soiled/Mutilated Notes:** * ₹2 per packet for exchanging soiled notes up to ₹50 denomination. * ₹2 per piece for adjudicating mutilated notes. * **Incentives for Distribution of Coins:** * ₹25 per bag for coin distribution over the counter. * Incentives are paid based on coin withdrawal from currency chests. * Banks must ensure coins are distributed to retail customers in small lots, not bulk customers. RBI will verify coin distribution through inspections. * **Payment of Incentives:** Incentives for soiled and adjudicated notes are paid based on receipts at the RBI Issue Office, with no separate claim needed from banks. Currency chest branches are responsible for distributing incentives to linked branches on a pro-rata basis. **6. Target Audience and Stakeholders:** The primary target audience is **all banks**, including currency chest branches, operating in India. The stakeholders include the **Reserve Bank of India (RBI)**, bank customers (members of the public), and retail businesses that rely on coin circulation. **7. Implementation Aspects (Inferred):** * **Responsible Agency:** The Reserve Bank of India (RBI) is the responsible agency for overseeing the implementation of the CDES, particularly the Department of Currency Management. * **Procedures:** Banks are not required to submit separate claims for soiled and adjudicated note incentives. The RBI will automatically pay these based on the notes received. Currency chest branches must distribute incentives to their linked branches. * **Oversight:** The RBI Regional Offices will inspect currency chests and conduct incognito visits to bank branches to verify coin distribution. **8. Expected Outcomes / Impact of Changes:** The intended outcomes of the CDES are: * Improved availability of clean notes and coins to the public. * Enhanced customer service at bank branches regarding currency exchange. * Increased establishment of currency chests in under-banked areas, especially in the North Eastern region. * More efficient distribution of coins to retail customers. * Reduction in the circulation of soiled and mutilated notes. **9. Conclusion:** The RBI's Master Direction on the Currency Distribution Exchange Scheme (CDES) represents a significant effort to improve currency management and customer service in the banking sector. By providing financial incentives, the RBI aims to encourage banks to actively participate in maintaining a clean note policy, facilitating currency exchange, and ensuring adequate coin circulation. The success of the CDES will depend on the active participation of banks and the effective oversight by the RBI.

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