Master Direction on Framework of Incentives for Currency Distribution & Exchange Scheme for bank branches including currency chests based on performance in rendering customer service to the members of public

## 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), as detailed in the provided document (DCM CC No.G503.41.01/2023-24 dated April 03, 2023). The policy aims to enhance customer service at bank branches by incentivizing the efficient distribution and exchange of notes and coins. Key incentives include reimbursement of capital and revenue expenditure for currency chests, and service charges for exchanging soiled/mutilated notes and distributing coins. The scheme targets all bank branches and currency chests. The expected outcome is improved circulation of clean notes and efficient coin distribution, ultimately benefiting the public. **2. Introduction:** The purpose of this report is to provide a comprehensive overview of the RBI's Master Direction on the Framework of Incentives for Currency Distribution Exchange Scheme (CDES), based solely on the information provided in the attached document. This report aims to inform affected industry stakeholders about the key provisions, implementation aspects, and expected outcomes of this scheme. **3. Policy Overview:** * **Core Objective(s):** The core objective of the CDES, as stated in the text, is to encourage all bank branches to provide better customer service to the public, keeping in view the objectives of the Clean Note Policy. This includes facilitating the exchange and distribution of notes and coins efficiently. **4. Background and Rationale:** The policy addresses the need to improve the quality and availability of currency in circulation. By incentivizing banks, the RBI aims to promote the Clean Note Policy and ensure efficient currency management practices. This likely stems from issues related to the circulation of soiled and mutilated notes, as well as an uneven distribution of coins, which can negatively impact public convenience and economic activity. **5. Key Provisions:** The CDES establishes a framework of financial incentives and service charges for bank branches and currency chests based on their performance in providing customer service related to currency management. The key provisions include: * **Incentives for Currency Chests:** * Reimbursement of 50% of capital expenditure for establishing and maintaining currency chests in centres with a population of less than 1 lakh, up to a ceiling of ₹50 lakh (inclusive of taxes). In the North Eastern region and underbanked states, reimbursement is up to 100% of capital expenditure, subject to the same ceiling. * Reimbursement of 50% of revenue expenditure for the first 3 years (inclusive of taxes). In the North Eastern region, reimbursement is for the first 5 years. * **Incentives for Exchange of Soiled and Mutilated Notes:** * ₹2 per packet for the exchange of soiled notes up to a denomination of ₹50 at bank branches. * ₹2 per piece for the adjudication of mutilated notes. * **Incentives for Distribution of Coins:** * ₹65 per bag for the distribution of coins. * An additional incentive of ₹10 per bag is provided for coin distribution in rural and semi-urban areas, subject to submission of a Concurrent Auditor (CA) certificate. * **Service Charges for Cash Deposits by Non-Chest Branches:** * For cash deposits by non-chest branches under linkage scheme with Currency Chests: * ₹1.8 per 100 pieces for Large Modern CCs. * ₹0.5 per 100 pieces for Other CCs. * **Operational Instructions:** * Incentives are paid based on soiled notes received at RBI Issue Offices, adjudicated notes received along with remittances or sent separately via registered post, and net withdrawal of coins from currency chests. * Banks do not need to submit separate claims; the currency chest branch distributes the incentive to linked branches/chests on a pro-rata basis. * RBI Regional Offices verify coin distribution through inspections and visits to branches. **6. Target Audience and Stakeholders:** The primary target audience and stakeholders are: * All bank branches, including those with and without currency chests. * Currency chest operators. * Customers of banks, as the ultimate beneficiaries of improved currency services. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The Reserve Bank of India (RBI) is the responsible agency for implementing and overseeing the CDES. RBI Regional Offices play a role in verifying coin distribution. * **Timelines/Procedures:** * The incentives are paid based on actual performance (soiled notes received, coins distributed, mutilated notes adjudicated). * Banks are not required to submit separate claims. Currency chest branches are responsible for distributing incentives to linked branches. * Revenue and capital expenditure reimbursement for currency chests is time bound as described in the incentives section. * The definition of "Large Modern CCs" is linked to a prior circular (RBI/2018-19/166 DCM(CC) No. 284/03.39.01/2018-19 dated April 08, 2019), implying adherence to specific standards. * Circular DCMCC No.975/2703.41.01/2021-22 dated August 27, 2021 remains unchanged, indicating its continued applicability. **8. Expected Outcomes / Impact of Changes:** The intended outcomes of the CDES are: * Improved customer service at bank branches regarding currency exchange and distribution. * Increased circulation of clean and genuine notes, contributing to a cleaner and more efficient currency system. * More efficient distribution of coins, particularly in rural and semi-urban areas. * Enhanced currency management practices by banks. **9. Conclusion:** The RBI's Master Direction on CDES represents a significant effort to improve currency management and customer service within the banking sector. By providing financial incentives, the scheme encourages banks to actively participate in the Clean Note Policy and ensure the efficient distribution of currency. Successful implementation of this scheme is expected to benefit both banks and the public by fostering a more robust and efficient currency system.

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