## Report on Reserve Bank of India's Currency Distribution Exchange Scheme (CDES)
**1. Executive Summary:**
This report analyzes the Reserve Bank of India's (RBI) Master Direction on the Framework of Incentives for Currency Distribution Exchange Scheme (CDES) for bank branches, including currency chests. This policy aims to promote the Clean Note Policy by incentivizing banks to provide better customer service in the exchange and distribution of notes and coins. The key findings highlight the financial incentives offered for opening and operating currency chests, exchanging soiled notes, distributing coins, and handling cash deposits by non-chest branches.
**2. Introduction:**
The purpose of this report is to provide an informative overview and analysis of the RBI's Master Direction on the Framework of Incentives for Currency Distribution Exchange Scheme (CDES) for bank branches. The analysis is based solely on the information provided in the policy text.
**3. Policy Overview:**
* Core Objective(s): The core objective of the CDES is to further the Clean Note Policy by encouraging all bank branches, including currency chests, to provide better customer service to the public in currency management. This is achieved through a framework of financial incentives.
**4. Background and Rationale:**
As a new policy, the CDES aims to address the need for a more efficient and effective currency management system. The policy suggests that incentivizing banks will likely lead to improved distribution of clean notes and coins, better exchange of soiled notes, and overall enhanced customer service related to currency handling.
**5. Key Provisions / Changes:**
As a new policy, the CDES establishes a framework of incentives for banks based on their performance in providing currency-related services to the public. The key provisions include:
* **Incentives for Opening and Operating Currency Chests (CCs):**
* Capital Cost: Up to 100% reimbursement of capital expenditure for CCs in the North Eastern region, Jammu & Kashmir, and Ladakh Union Territories, capped at ₹50 lakh (inclusive of taxes).
* Revenue Cost: 50% reimbursement of revenue expenditure for the first 5 years of CC operations in the North Eastern region, Jammu & Kashmir, and Ladakh Union Territories (inclusive of taxes). This applies to new applications received after the date of the Master Direction.
* **Incentives for Exchange of Soiled Notes:** ₹2 per packet for adjudication of mutilated notes and for the exchange of soiled notes (denominations of ₹50 and below) over the counter at bank branches. ₹2 per piece for adjudication of mutilated notes.
* **Incentives for Distribution of Coins:** ₹65 per bag for coin distribution, with an additional ₹10 per bag incentive for coin distribution in rural and semi-urban areas (subject to a Concurrent Auditor certificate).
* **Service Charges for Cash Deposit by Non-Chest Branches:** CCs can levy service charges on non-chest branches for cash deposits under the linkage scheme: ₹8 per 100 pieces for large modern CCs and ₹5 per 100 pieces for other CCs.
* **Operational Instructions:** The policy also outlines operational instructions for the payment of incentives, including the requirement that incentives are paid on soiled notes actually received at the RBI Issue Office and that currency chest branches pass on incentives to linked branches on a pro-rata basis.
**6. Target Audience and Stakeholders:**
The primary target audience and stakeholders are:
* All banks operating in India.
* Bank branches, including currency chests.
* Customers of banks, who are expected to benefit from improved currency-related services.
* The Reserve Bank of India (RBI), responsible for overseeing the implementation and effectiveness of the scheme.
**7. Implementation Aspects (Inferred):**
* **Responsible Agency/Bodies:** The RBI is the primary responsible agency, specifically the Department of Currency Management.
* **Procedures:** Banks are required to submit invoices to the RBI for claiming incentives. Coin distribution is subject to verification by RBI Regional Offices through inspection of currency chests and incognito visits to branches. Concurrent Auditor certificates are required for additional coin distribution incentives in rural and semi-urban areas.
**8. Expected Outcomes / Impact of Changes:**
The intended outcomes of the CDES are likely to include:
* Improved availability of clean banknotes and coins to the public.
* Increased exchange of soiled and mutilated notes at bank branches.
* Enhanced distribution of coins, particularly in rural and semi-urban areas.
* Overall improvement in the quality of customer service provided by banks related to currency management.
* Establishment of new currency chests, especially in the North Eastern region and the Union Territories of Jammu & Kashmir and Ladakh.
**9. Conclusion:**
The RBI's Master Direction on the Framework of Incentives for Currency Distribution Exchange Scheme (CDES) is a significant policy aimed at improving currency management and promoting the Clean Note Policy. By providing financial incentives to banks, the RBI intends to encourage better customer service, increased exchange of soiled notes, and enhanced distribution of coins, ultimately benefiting the public. The policy highlights RBI’s focus to ensure good quality banknotes are available to the public.
Key Entities Referenced
RESERVE BANK OF INDIA: The central bank of India, responsible for issuing guidelines and instructions for currency management.
RBI: Abbreviation for Reserve Bank of India.
RBIDCM202526136: Reference number for the communication.
DCM CC No. G303.41.01202526: Document control number related to currency management.
April 24, 2025: Date of the notification.
The Chairman Managing Director Chief Executive Officer All banks: Addressees of the communication.
Madam Dear Sir: Salutation of the communication.
Master Direction on Framework of incentives for Currency Distribution Exchange Scheme for bank branches including currency chests: Subject of the communication, outlining incentives for currency distribution and exchange.
Currency Distribution Exchange Scheme: A scheme to encourage bank branches to provide better customer services related to currency management.
CDES: Abbreviation for Currency Distribution Exchange Scheme.
Reserve Bank of India Act, 1934: Legal basis for RBI's authority.
RBI Act: Abbreviation for Reserve Bank of India Act, 1934.
Section 45: Section of the Reserve Bank of India Act, 1934 that grants authority to the RBI.
Banking Regulation Act, 1949: Another legal basis for RBI's guidelines.
Section 35A: Section of the Banking Regulation Act, 1949 that grants authority to the RBI.
Clean Note Policy: Objective of the RBI related to currency management.
AnnexI: Attachment containing the Master Direction.
Frequently Asked Questions: FAQs related to the Currency Distribution Exchange Scheme.
FAQs: Abbreviation for Frequently Asked Questions.
AnnexII: Attachment containing the Frequently Asked Questions.
AnnexIII: Attachment containing Illustrations.
Sanjeev Prakash: Chief General Manager-in-Charge.
DEPARTMENT OF CURRENCY MANAGEMENT, CENTRAL OFFICE, AMAR BUILDING, 4TH FLOOR, SIR P M ROAD, MUMBAI 400001: Address of the Department of Currency Management.
Currency Chests: CCs - Part of the Currency Distribution Exchange Scheme CDES.
CCs: Abbreviation for Currency Chests.
North Eastern region: Geographic location for incentives on CCs.
State Governments: Referring to State Governments in North Eastern region at inaccessible hilly places.
Jammu Kashmir: Union Territory mentioned in the context of CC operations.
Ladakh: Union Territory mentioned in the context of CC operations.
Union Territories: Referring to Jammu & Kashmir and Ladakh.
Concurrent Auditor: CA - certification required for coin distribution incentive in rural and semi-urban areas.
CA: Abbreviation for Concurrent Auditor.
RBI Regional Offices: The regional offices of the Reserve Bank of India are responsible for inspection of currency chests.
DCMCC No.9752703.41.01202122: Circular number related to operational instructions.
August 27, 2021: Date of the circular DCMCC No.9752703.41.01202122.
Cash Department of lssue Department Manual 2021: Refers to the RBI manual related to cash management.
RBI201819166 DCM CC No. 284203.39.01201819: Circular number specifying minimum standards for a Currency Chest (CC).
April 08, 2019: Date of the circular RBI201819166 DCM CC No. 284203.39.01201819.
बेट� बचाओ
ब ेट � प ढ़ ा ओ
भारतीय �रज़वर् बैंक
_______________________ RESERVE BANK OF INDIA ______________________
www.rbi.org.in
RBI/DCM/2025-26/136
DCM (CC) No. G-3/03.41.01/2025-26 April 24, 2025
The Chairman / Managing Director / Chief Executive Officer
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 Reserve Bank of India Act, 1934
(RBI Act) and Section 35A 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 Master Direction incorporating the updated guidelines / circulars on the subject
is at Annex-I. The Frequently Asked Questions (FAQs) and few Illustrations are at
Annex-II and III respectively.
Yours faithfully,
(Sanjeev Prakash)
Chief General Manager-in-Charge
Encl: As above
_____________________________________________________________________
मुद्रा प्रबंध िवभाग, केंद्रीय कायार्लय, चौथी मंिजल, अमर भवन, सर पी .एम .रोड, मुंबई - 400 001
DEPARTMENT OF CURRENCY MANAGEMENT, CENTRAL OFFICE, AMAR BUILDING, 4TH FLOOR, SIR P M ROAD, MUMBAI - 400001
फोन TELEPHONE No. 22663000 / 22604000 फै� FAX NO. 22662442
ई-मेल E-mail: cgmincdcm@rbi.org.in
िह�ी आसान है, इसका प्रयोग बढ़ाइए ।Annex-I
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 and operating a. Capital Cost: Up to 100% of capital
CCs in North Eastern expenditure is eligible for reimbursement
region and at subject to the ceiling of ₹50 lakh (inclusive of
inaccessible / hilly places all taxes).
(as considered by State b. Revenue cost: 50% of revenue
Governments/ any expenditure is eligible for reimbursement for
appropriate authority) of the first 5 years of CC operations (inclusive of
Jammu & Kashmir and all taxes).
Ladakh Union Territories. (The revised instructions would be applicable
to new applications for opening of CCs in
these areas received on or after the date of
Master Direction. Earlier cases on the subject
may continue to be processed as per extant
guidelines prevalent on the date of
submission of application)
ii Exchange of soiled notes a. Exchange of soiled notes – ₹2/- per
/ adjudication of mutilated packet for exchange of soiled notes in the
notes over the counter at denominations of ₹50/- and below.
bank branches
1b. Adjudication of mutilated notes – ₹2/-
per piece.
iii Distribution of coins a. ₹65/- per bag1 for distribution of coins.
b. An additional incentive of ₹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- Service charge to be levied by the CC on the
chest branches under non-chest branches
Linkage scheme with a. Large modern CCs2 – ₹8/- per 100 pieces.
CCs b. Other CCs – ₹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. The CC holding banks shall raise invoice to RBI for claiming incentives. All other
instructions issued vide circular DCM(CC) No.97527/03.41.01/2021-22 dated
August 27, 2021 remain unchanged.
v. Currency chest branch shall pass on the incentive to the linked branches for
the soiled notes deposited / coins distributed / mutilated notes adjudicated by
them on pro-rata basis.
vi. The distribution of coins shall be verified by RBI Regional Offices through
inspection of currency chests / incognito visit to branches, etc.
1 For incentive calculation, 5000 pieces of 50 paise coins; 2500 pieces of ₹1, ₹2 or ₹5 coins; 2000 pieces of ₹10
or ₹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.
2Annex-II
FREQUENTLY ASKED QUESTIONS
Master Direction on Framework of Incentives for “Currency Distribution &
Exchange Scheme (CDES)” for bank branches including currency chests
1. What is Clean Note Policy?
It is a policy adopted by RBI to ensure availability of good quality banknotes to
members of the public.
2. What is included in capital and revenue cost?
Capital costs are one-time expenditures incurred for acquiring fixed assets or
infrastructure necessary to set up Currency Chest. Revenue costs are recurring
expenses incurred on day-to-day operations and maintenance of Currency Chest. The
actual nature of expenditure shall be ascertained by the Issue Office concerned at the
time of reimbursement of cost to the bank.
3Annex-III
Illustrations
1. Opening and operating CCs in North Eastern region / at inaccessible / hilly places
(as considered by State Governments/ any appropriate authority) of Jammu and
Kashmir/ Ladakh Union Territories:
Illustration 1: Reimbursement of Capital Expenditure
Capital Cost incurred and claimed by the bank: ₹75 lakh (inclusive of taxes) (A)
Capital Cost to be reimbursed: 100% of (A) (subject to a ceiling of ₹50 lakh per CC) = ₹50
lakh (inclusive of taxes)
Illustration 2: Reimbursement of Revenue Expenditure
Type of Period Amount Claimed Amount Reimbursed
Expenditure (inclusive of taxes) (inclusive of taxes)
claimed (A) 50% of (A)
1st Year ₹15 lakh ₹7.5 lakh
2nd Year ₹16 lakh ₹08 lakh
Revenue Cost 3rd Year ₹16 lakh ₹08 lakh
4th Year ₹17 lakh ₹8.5 lakh
5th Year ₹18 lakh ₹09 lakh
2. Incentive for Exchange of soiled notes / adjudication of mutilated notes over the
counter at bank branches:
Illustration 1: Incentive for Exchange of soiled notes over the counter at bank branches
Details of Soiled Notes Remittance Received
Denomination ₹10 ₹20 ₹50 ₹100
No. of pieces 5500 6500 7500 5000
No. of packets 55 65 75 50
Total
discrepancies
(Shortage /
110 245 75 245
Mutilated /
Counterfeit) in
pieces
Total
banknotes
5390 6255 7425 NA
considered for
incentives
Total packets
considered for 53 62 74 NA
incentive
Incentive
Amount * 106 124 148 NA
(before tax)
* @ ₹2 per packet
4Illustration 2: Incentive for adjudication of mutilated notes over the counter at bank branches
Details of Mutilated Notes received over the counter at bank branches
Denomination ₹10 ₹20 ₹50 ₹100
No. of pieces 400 300 370 430
Total
discrepancies
(Shortage / 05 10 04 08
Counterfeit) in
pieces
Total pieces
considered for 395 290 366 422
incentive
Incentive
Amount 790 580 732 844
(before tax)
* @ ₹2 per piece
3. Incentives for distribution of coins:
Illustration:
Denomination Total Total Pieces Total Bags Total Bags Net Standard
(Coin) Pieces (Withdrawn) (Deposited) (Withdrawn) Bags
(Deposited) (Withdrawn)
₹2 4000 2500 1.6 1 -0.6
₹5 0 7500 0 3 3
₹10 2000 4000 1 2 1
Total (Total sum including decimals) 3.4
Net Bags considered for incentives (Only Full bags considered) 3
Coin Distribution in Urban Area: Incentive Amount for 3 bags @ ₹65 per bag: ₹195 (before
tax)
Coin Distribution in Semi-Urban/ Rural Area: Incentive Amount for 3 bags @₹75 per bag:
₹225 (before tax)
Note: In terms of para 5.1 of Chapter 3-Cash Department of lssue Department Manual 2021,
5000 pieces of 50 paise coins; 2500 pieces of ₹1, ₹2 or ₹5 coins; 2000 pieces of ₹10 or ₹20
coins would be deemed to constitute one bag.
5