Date: 2016-07-20Category: Not ApplicableState: Union GovernmentCountry: India
Master Direction on Levy of Penal Interest for Delayed Reporting/Wrong Reporting/Non-Reporting of Currency Chest Transactions and Inclusion of Ineligible Amounts in Currency Chest Balances
## Report on RBI Master Direction DCMCC No.G/203.35.01/2016-17: Penalties for Currency Chest Transaction Reporting
**1. Executive Summary:**
This report analyzes the Reserve Bank of India (RBI) Master Direction DCMCC No.G/203.35.01/2016-17, issued on July 20, 2016. This is a *new* policy that aims to ensure discipline and accuracy in the reporting of currency chest transactions by banks. The core purpose is to enforce timely and accurate reporting through the imposition of penal interest for delays, wrong reporting, non-reporting, and inclusion of ineligible amounts in currency chest balances. Key findings indicate a strict regime of penalties intended to prevent misuse or misrepresentation of currency chest operations.
**2. Introduction:**
The purpose of this report is to provide an informative overview and analysis of the RBI Master Direction DCMCC No.G/203.35.01/2016-17. The analysis is based solely on the text of the Master Direction provided.
**3. Policy Overview:**
* **Core Objective(s):** The core objectives, as inferred from the text, are to:
* Ensure timely and accurate reporting of currency chest transactions by banks.
* Maintain discipline among banks in adhering to reporting requirements.
* Support the RBI's Clean Note Policy by preventing errors or deliberate misreporting of currency chest activities.
**4. Background and Rationale:**
* **New Policy:** This Master Direction addresses the potential problems associated with inaccurate or delayed reporting of currency chest transactions. Such inaccuracies could lead to mismanagement of currency, potentially impacting the financial system. The policy aims to mitigate these risks by establishing a system of penalties for non-compliance. The reference to the Clean Note Policy suggests an underlying concern about maintaining the integrity and quality of currency in circulation.
**5. Key Provisions / Changes:**
* **New Policy:** This section details the main components, rules, and actions mandated by the provided text:
* **Reporting Threshold:** The minimum amount for deposit into or withdrawal from a currency chest is Rs. 1,00,000, and thereafter, in multiples of Rs. 50,000.
* **Reporting Deadlines:** Currency chests must report all transactions through ICCOMS by 9 PM on the same day via the Secured Website (SWS) to their link offices. Link offices must then report the consolidated position to the Issue Offices by 11 PM on the same day. Sub-Treasury Offices (STOs) must report directly to the Issue Office by 11 PM on the same day.
* **Penal Interest for Delays:** Penal interest will be levied on the amount due from the chest-holding bank for any delay in reporting transactions. The interest is calculated on a T+0 basis (transactions not reported by the Link Office to the Issue Office by 11 PM). The RBI retains discretion to grant a grace period. Penal interest is also charged for delays in submission of chest slips by single-chest STOs.
* **Penal Interest for Wrong Reporting:** Penal interest is levied for all cases of wrong reporting until the corrected advice is received by the RBI. This applies even if the chest slip was correct but the Link Office Statement was incorrect. Remittances of fresh notes to currency chests must not be reported as "deposit" transactions.
* **Soiled Note Remittances:** Reporting soiled note remittances to the RBI or diversion to other chests as "withdrawals" will incur a penalty of Rs. 50,000, irrespective of the value or duration of the wrong reporting.
* **ICCOMS Reporting of Diversions:** Diversions must be reported in columns "2A and 4A" in ICCOMS, not under "Withdrawal" and "Deposit" columns ("4E" and "2E").
* **Penal Interest for Ineligible Amounts:** Penal interest is levied when a bank has "ineligible" credit in its current account with the RBI due to reporting errors. This also applies to shortages in chest balances, pilferage, frauds, and counterfeit banknotes. Cash that isn't freely available to the joint custodians is considered 'ineligible'.
* **Rate of Penal Interest:** Penal interest is levied at a rate of 2% above the prevailing Bank Rate.
* **Treasury Application:** The instructions apply to currency chests at treasuries/sub-treasury offices.
* **Representations:** Representations for reconsideration due to delays may be made in cases of genuine difficulties faced by chests, especially in remote areas or due to natural disasters, within one month of the debit. Representations for wrong reporting are not considered. Clerical errors or staff inexperience are not valid grounds for waiver.
**6. Target Audience and Stakeholders:**
Based on the text, the primary target audience and stakeholders are:
* All banks having currency chests.
* The Chairman/Managing Director/Chief Executive Officer of these banks.
* State Governments (specifically, the Director of Treasuries).
* Sub-Treasury Offices (STOs).
* Link offices of banks with currency chests.
**7. Implementation Aspects (Inferred):**
* **Responsible Agency/Bodies:** The Reserve Bank of India (RBI), specifically the Issue Offices, is the primary responsible body. Link offices of banks with currency chests also have implementation responsibilities for consolidating and reporting chest transactions.
* **Timelines and Procedures:** Strict deadlines are imposed for reporting (9 PM and 11 PM). Banks must use the ICCOMS system and the Secured Website (SWS) for reporting. The policy outlines specific procedures for reporting diversions and soiled note remittances.
**8. Expected Outcomes / Impact of Changes:**
* **New Policy:** The likely intended outcomes include:
* Improved accuracy and timeliness of currency chest transaction reporting.
* Reduced instances of wrong reporting, delayed reporting, and non-reporting.
* Increased compliance with RBI guidelines regarding currency chest operations.
* Greater transparency and accountability in currency management.
* Support for the RBI's Clean Note Policy by ensuring proper handling and accounting of currency.
**9. Conclusion:**
The RBI Master Direction DCMCC No.G/203.35.01/2016-17 represents a significant measure to enforce discipline and accuracy in currency chest operations. By establishing a clear framework of penalties for non-compliance, the RBI aims to improve the management and integrity of currency circulation within the banking system. The strict reporting requirements and financial penalties underscore the importance the RBI places on maintaining accurate and timely information regarding currency chest transactions. This policy reinforces the RBI's commitment to a robust and reliable currency management system.
Key Entities Referenced
RBIDCM20161735 Master Direction DCMCC No.G 203.35.01201617: Master Direction identifier for the document.
July 20, 2016: Date of the Master Direction.
The Chairman Managing DirectorChief Executive Officer All Banks having Currency Chests: Addressees of the Master Direction.
The Director of Treasuries State Governments: Additional addressees of the Master Direction.
Master Direction on Levy of Penal Interest for Delayed ReportingWrong ReportingNonReporting of Currency Chest Transactions and Inclusion of Ineligible Amounts in Currency Chest Balances: Subject of the Master Direction.
RBI Act, 1934: The Reserve Bank of India Act, 1934, a legal basis for the direction.
Banking Regulation Act, 1949: The Banking Regulation Act, 1949, another legal basis for the direction.
Bank: Refers to banks regulated by the RBI
Clean Note Policy: RBI's policy for maintaining the quality of banknotes in circulation.
RBI website: Website of the Reserve Bank of India, where the Master Direction is placed.
www.rbi.org.in: URL for the Reserve Bank of India website.
P. Vijaya Kumar: Chief General Manager who issued the Master Direction.
Annex 1. Penal interest for Delayed ReportingWrong ReportingNonReporting of Currency Chest Transactions: Appendix to the Master Direction that describes the requirements and penalties
ICCOMS: System for reporting currency chest transactions.
Secured Website SWS: Secure website used by currency chests to report data to link offices.
SubTreasury Offices STOs: Sub-Treasury Offices that report transactions directly to the Issue Office of the Reserve Bank.
Issue Office: The office of the Reserve Bank of India that receives reports from link offices and STOs.
Link Office Statements: Statements reported by Link Offices.
Reserve Bank: Refers to the Reserve Bank of India.
CRRSLR: Cash Reserve Ratio and Statutory Liquidity Ratio
Joint Custodians: Individuals responsible for the custody of cash held in currency chests.
Bank Rate: The rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers.
Head Controlling office: The office that representations should be made through.
RBI/DCM/2016-17/35
Master Direction DCM(CC) No.G -2/03.35.01/2016-17 July 20, 2016
1. The Chairman & Managing Director/Chief Executive Officer
(All Banks having Currency Chests)
2. The Director of Treasuries
(State Governments)
Dear Sir/Madam
Master Direction on Levy of Penal Interest for Delayed Reporting/Wrong
Reporting/Non-Reporting of Currency Chest Transactions and Inclusion of
Ineligible Amounts in Currency Chest Balances
In terms of the Preamble, under Section 45 of the RBI Act, 1934 and 35 A of the Banking
Regulation Act, 1949, the Bank issues guidelines / instructions for realising the
objectives of our Clean Note Policy. With a view to sustain these efforts and ensure
discipline among the banks on timely and accurate reporting of currency chest
transactions, we have issued instructions on the subject.
2. The Master Direction enclosed incorporates updated guidelines / circulars on the
subject. The Direction will be updated from time to time as and when fresh instructions
are issued.
3. This Master Direction has been placed on RBI website at www.rbi.org.in.
Yours faithfully,
(P. Vijaya Kumar)
Chief General Manager
Encl : As aboveAnnex
1. Penal interest for Delayed Reporting/Wrong Reporting/Non-Reporting of
Currency Chest Transactions
1.1 Reporting of Currency Chest Transactions
The minimum amount of deposit into/withdrawal from currency chest will be
Rs.1,00,000/- and thereafter, in multiples of Rs.50,000/-.
1.2 Time limit for Reporting
1.2.1 The currency chests should invariably report all transactions through ICCOMS on
the same day by 9 PM by uploading data through the Secured Website (SWS) to
their respective link offices. Link offices should invariably report the consolidated
position to the Issue Offices latest by 11 PM on the same day.
1.2.2 The Sub-Treasury Offices (STOs) should report all transactions directly to the
Issue Office of the Reserve Bank by 11 PM on the same day.
1.2.3 Relaxation in respect of strike period in banks
Relaxation in the reporting period on account of general/specific strike situation
will be considered on case-to-case basis.
1.3 Levy of penal interest for delays
1.3.1 In the event of delay in reporting currency chest transactions, penal interest at the
rate indicated in paragraph 3 of this circular will be levied on the amount due from
the chest holding bank for the period of delay. Penal interest will be calculated on
T+0 basis i.e. penal interest will be levied in respect of transactions not reported
by Link Office to the Issue Office by 11 PM on the same business day. However,
Reserve Bank may at its discretion grant appropriate grace period in the matter of
levy of penal interest.
1.3.2 Penal interest will also be charged for delay in submission of chest slips in the
case of single chest / STOs directly linked to Issue Department of the circle.
1.4 Wrong reporting and levy of penal interest
Penal interest will be levied in respect of all cases of wrong reporting in the same manner
till the date of receipt of corrected advice by Reserve Bank. As debits/credits to banks'
current accounts are raised on the basis of the figures reported in the Link Office
Statements, penal interest will invariably be levied in all cases of wrong reporting in the
Link Office Statements even if the reporting was done correctly in the chest slips. It is
expected that Link Offices would ensure the correctness of figures reported by the
respective currency chests. Particular care should be taken to ensure that remittances offresh notes/notes to the currency chests are not reported as 'deposit' transactions in the
Link Office Statements.
1.5 Reporting of Soiled note remittances to RBI / diversion to other chests
Soiled note remittances to RBI /diversion to other currency chest/s should not be shown
as withdrawal by chest/s / link offices. In case such remittances are wrongly reported as
'withdrawals', a penalty of Rs.50,000/- will be levied irrespective of the value of
remittance and period of such wrong reporting.
1.6 Reporting of diversions in ICCOMS
As regards reporting of diversion/s in ICCOMS, they must be reported in the column "2A
and 4 A" i.e. the chest receiving the diversion should report under 2 A and the remitting
chest should report the amount under 4A in the chest slip without any delay. Diversion
amounts, even to the chest of the same bank should not be reported under "Withdrawal"
and "Deposit" columns i.e. 4E and 2E (which are for currency transfer transactions).
1.7 Maximum penal interest to be charged
There is no stipulation regarding the maximum amount of penal interest leviable for
wrong/delayed reporting. As the intention is to ensure timely and correct reporting of
chest transactions, penal interest will be recovered in all applicable cases, irrespective of
the amount of the transaction concerned/amount of penal interest subject to rounding off
the penal interest amount to the nearest Rupee.
2. Penal interest for inclusion of ineligible amounts in the currency chest
balances
2.1 Penal interest will be levied in all cases where the bank has enjoyed 'ineligible'
credit in its current account with Reserve Bank on account of wrong reporting / delayed
reporting/non-reporting of transactions. Penal measures will also be taken in cases of
shortages in chest balances / remittances, shortages due to pilferage / frauds, counterfeit
banknotes detected in chest balances / remittances as per the prevailing “scheme of
Penalties”.
2.2 Further, only cash held in the custody of joint custodians and 'freely available' to
them is eligible for inclusion in the chest balances. Thus, cash kept for safe custody in
sealed covers for whatever reasons/cash in trunks/bins under the lock and key of any
official/s other than the Joint Custodians or bearing a third lock put by any official in
addition to the two locks of the Joint Custodians is not eligible for being included in the
chest balances. If such amounts are included in the chest balances, these will be treated
as instances of wrong reporting and will attract penal interest at the rate specified in para
3.
2.3 In all the above cases (excepting shortages in chest balances / remittances,
shortages due to pilferage / frauds, counterfeit banknotes detected in chest balances /remittances), penal interest will be levied from the date of inclusion of 'ineligible'
amounts in chest balances till the exclusion of such amounts from chest balances.
Penal measures for shortages in chest balances / remittances, shortages due to
pilferage / frauds, counterfeit banknotes detected in chest balances / remittances will be
taken on the basis of prevailing “scheme of Penalties”.
3. Rate of penal interest
Penal interest shall be levied at the rate of 2% over the prevailing Bank Rate for the
period of delayed reporting/wrong reporting/non-reporting /inclusion of ineligible amounts
in chest balances.
4. Levy of penal interest in respect of currency chests at treasuries
The above instructions shall be applicable to currency chests at treasury/sub-treasury
offices also.
5. Representations
5.1 As the sole criterion for levy of penal interest for delayed reporting is the number
of days of delay, there should ordinarily be no occasion for banks to request for
reconsideration of the Reserve Bank's decision in individual cases. However,
representations, if any, on account of genuine difficulties faced by chests especially in
hilly/remote areas and those affected by natural calamities, etc., may be made to the
Issue Office concerned through the Head / Controlling office of the bank concerned
within a month from the date of debit of the bank concerned.
5.2 In the case of wrong reporting representations for waiver will not be considered.
{cf. para 1.4 above}.
5.3 As the intention behind the levy of penal interest is to inculcate discipline among
banks so as to ensure prompt/correct reporting, pleas by banks for waiver of penal
interest on grounds that delayed/wrong/non-reporting did not result in utilization of the
Reserve Bank's funds or shortfall in the maintenance of CRR/SLR or that they were the
result of clerical mistakes, unintentional or arithmetical errors, first time error,
inexperience of staff etc., will not be considered as valid grounds for waiver of penal
interest. Further, we will take a serious view of all such lapses.
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