Currency Distribution and Exchange Scheme (CDES) of RBI

Cash management refers to a broad area of finance involving the collection, handling, and usage of cash. Issuance and distribution of cash is one of the important functions of Reserve Bank of India. The RBI has agency arrangements mainly with scheduled commercial banks, under which a currency chest is managed. Bank notes and coins are then distributed through bank branches and Automated Teller Machines (ATMs). The commercial banks having a currency chest, need not approach RBI on daily basis for deposits or withdrawals of cash. During the close of the day if the bank receives more money than payment, the bank deposits this excess to the currency chest and gets a credit. If the payment is more than receipts, the bank withdraws from the currency chest and informs the RBI.

Reserve Bank has announced today (May 6, 2016) the revised performance-based incentives to banks including currency chests under the existing CDES scheme which offers financial incentives for the exchange of notes and coins by the bank branches.

Salient feature of revised schemes are as under;

Opening of currency chests:

In the revised scheme, the incentives for installation of machines have been restricted to Cash Cyclers and ATMs dispensing lower denomination notes subject to certain caps on reimbursement of cost per machine. Banks which open currency chests at centres having the population of less than one lakh in under-banked states will be eligible for reimbursement of 50% of capital expenditure with a ceiling of Rupees 50 lakh per currency chest beside reimbursements of 50% of revenue expenditure for the first 3 years. In the North Eastern States, 100% of capital with a ceiling of Rupees 50 lakh per currency chest is eligible for reimbursement besides reimbursements of 50% of revenue expenditure for the first 5 years.

Exchange of soiled notes and adjudication of mutilated notes:

Banks will be reimbursed incentives at the following rates;

i). Adjudication of mutilated notes -Rs.2 per piece.

ii).Exchange of soiled notes up to denomination of Rs.50/- Rs.2 per packet.

iii) Retail distribution of coins over counter – Rs.25 per bag.

Installation of Cash recyclers/ATMs:

1. a) In Metro/urban areas : Cash Recyclers or ATMs dispensing lower denomination notes up to Rs.100 [ ATMs distributing higher denomination of Rs.500 and above are not eligible] are eligible for reimbursement of 50 % actual cost of the machine or Rs.2 lakh whichever is lower.
2. b) In semi-urban areas: ATMs dispensing lower denomination notes up to Rs.100 installed at [ATMs distributing higher denomination of Rs.500 and above are not eligible] are eligible for s reimbursement of 60 % actual cost of the machine or Rs.2.50 lakh which ever is lower.

The banks intending to purchase various machines shall submit their annual plan containing the details of the machines and the cost, to Issue Offices of RBI latest by April 15 of every year on an ongoing basis. The Issue offices, on receipt of the plans, may advise the maximum amount of reimbursement permissible to each bank for that year.However, with regard to the ensuing year (i.e. July 01, 2016 to June 30, 2017), the proposals may be submitted latest by May 31, 2016, as a special case.There is no need to claim reimbursement separately for the exchange of soiled notes/adjudicated notes/retail delivery of coins. The incentives will be paid on the basis of soiled/adjudicated notes actually received or coins delivered by the Issue office of RBI.The claims for incentives for installation of Cash Recyclers and ATMs dispensing lower denomination notes should be submitted to the respective Issue Office of RBI on the quarterly basis within 30 days from the close of the respective quarter through the Link Office of the bank concerned. Such claims may however,be submitted only after full payment is made to the vendors for the machines.