What is Currency Chest and Currency note delivery system?

Currency chests are storehouses where banknotes and rupee coins are stocked on behalf of the Reserve Bank for distribution to bank branches in their area of operation. As on March 31, 2021, there were 3054 currency chests. Besides these, there are around 3,746 bank branches that act as small coin depots to stock small coins. Out of the 3054 currency chests in the country,  67 percent are held in branches of the State Bank of India and other Nationalised banks hold 22 percent taking the share of the PSU banks to 95 percent. The Reserve Bank has authorised select scheduled banks to establish currency chests. Private sector banks (160), Cooperative banks (3) and foreign banks (4), and regional rural banks (5) do not have a large role to play in stocking currency on behalf of RBI. However, these currency chests are expected to distribute banknotes and rupee coins to other bank branches in their area of operation. Besides, chests act as cash distribution centers. Also, RBI takes back soiled notes and mutilated notes from the public through currency chests.

Currency note delivery system:

The responsibility for managing the currency in circulation is vested in the RBI. India has four currency note printing presses. The Central government controls two of them – at Nashik in Maharashtra and Dewas in Madhya Pradesh while an RBI subsidiary, the Bharatiya Reserve Bank Note Mudran (P) Ltd controls the other two – at Mysuru in Karnataka and Salboni in West Bengal. The RBI calculates the annual cash requirement of the country before the beginning of every fiscal year. The number of notes and denominations that need to be printed is determined using an econometric model based on economic growth, rate of inflation, number of notes destroyed due to demonetization or remonitisation and the replacement rate of soiled notes, etc.  In the case of minting coins, the government of India takes a decision on the amount of coins that have to be minted. The RBI offices in various cities receive the new notes and coins from the above presses and the mints as per the order placed. RBI would send these notes and coins to the currency chests and small coin depots from where they are distributed to their branches and other bank branches in their area of operation.

Related post: