RBI asks banks to supply at least 40% of currency to rural areas

The Reserve Bank of India (RBI) on Tuesday asked banks to supply at least 40 percent of currency to rural areas.

In a notification published on its website, the RBI said, "On observing that bank notes, being supplied to rural areas, at present, are not commensurate with the requirements of rural population... With a view to ensure that at least 40% bank notes are supplied to rural areas and to mitigate the issue in a more enduring manner, the banks maintaining currency chests are advised to take the following steps..."

Distribution Channels and Proportion of currency flow

i. Banks should advise their currency chests to step up issuance of fresh notes to rural  branches  of  RRBs,  DCCBs  and  commercial  banks,  White  Label  ATMs  in   rural areas and post offices in rural areas on priority basis which are considered main rural channels of distribution.  

ii. As  the  rural  requirements  could  vary  from  district  to  district  depending  on variations in the rural and urban mix of each district in terms of relative shares in CASA deposits  and  number  of  deposit  accounts,  to  facilitate  a  need  based  approach  in this regard a certain percentage of allocation  has been assigned to  each  district as per Annex 1 depending on the rural and urban mix.   

iii. Accordingly, all Chests operating in a district must issue bank notes to the above mentioned   distribution   channels   in   the   indicated  proportion. The  indicated proportion may be maintained on weekly average basis at each chest level as it may be difficult to stick to the proportion on daily basis.

Reporting for monitoring  

iv. Currency  chests  must  furnish  daily  issuances to  the  above  categories  to their  Link  Offices  (LO)  along  with  chest  slips  with  a  weekly  summary  as  at  close  of  business  on  every  Friday.  LOs  should  in  turn  forward  it to  the  RBI’s  Regional  Office  concerned (reporting  format  annexed) to facilitate  a  review. It  may  be  similar  to  the  chest  balances  reporting  mechanism (Annex  2).  LOs  may  monitor  the  daily  reports  to  avoid  lumpiness  in  issuances  and  to  ensure  that  issuances   are evenly.  

Denominational mix

v. Chests  should  issue  bank  notes  in denominations of 500 and  below. In particular ATMs,  including  WLAOs, may  be  issued  500s  and  100s  and   among  ATMs  category,  Off-site  ATMs should be allocated higher  proportion  of   cash as against on site ATMs  as they are more important in last mile  currency connectivity.

vi.  Existing  stock  of  other  denominations  notes  below 100 should  be  issued   liberally.

vii. Banks should indent for coins, obtain supply from Issue Departments of Reserve Bank of India, if required,and ensure supply to public on priority basis.