What changed
RBI consolidated and updated all previous circulars on the CDES into a single Master Direction effective April 1, 2024. The framework specifies financial incentives for setting up currency chests in underbanked states (including enhanced support for the North Eastern region), fees for soiled note exchange and mutilated note adjudication, and coin distribution incentives with an additional rural/semi-urban bonus.
What it means for you
Banks can now claim up to 50% capital cost reimbursement (100% in North East) for new currency chests in towns with population under 1 lakh in underbanked states, capped at ₹50 lakh per chest. Revenue cost reimbursement is available for 3 years (5 years in North East). Standardized service charges for soiled note packets (₹2 per packet for denominations up to ₹50), mutilated note pieces (₹2 each), and coin bags (₹65 per bag, plus ₹10 extra in rural/semi-urban areas) provide clear revenue streams for branch-level currency operations.
What you must do
- Review the Master Direction and update internal SOPs for claiming CDES incentives from RBI Issue Offices.
- Ensure currency chest branches pass on incentives to linked non-chest branches on a pro-rata basis for soiled notes, mutilated notes, and coin distribution.
- Arrange concurrent auditor certification for coin distribution in rural and semi-urban areas to claim the additional ₹10 per bag incentive.
- Train branch staff on the revised fee structure for soiled note exchange (₹2 per packet) and mutilated note adjudication (₹2 per piece) to ensure accurate claims.
Who it affects
All scheduled commercial banks with currency chests, Bank branches handling over-the-counter currency exchange, Non-chest branches linked to currency chests under the linkage scheme, Banks operating in underbanked states and North Eastern region
What is the incentive for opening a new currency chest in an underbanked area?
Banks can claim reimbursement of 50% of capital expenditure (inclusive of taxes) up to ₹50 lakh per chest. In the North Eastern region, up to 100% of capital expenditure is reimbursable, subject to the same ₹50 lakh ceiling. Revenue expenditure is reimbursed at 50% for the first 3 years (5 years in North East).
How are incentives for coin distribution calculated?
Banks receive ₹65 per bag of coins distributed, based on net withdrawal from the currency chest. An additional ₹10 per bag is paid for distribution in rural and semi-urban areas, provided a concurrent auditor certificate is submitted. No separate claim form is needed; RBI pays based on chest withdrawal data.
Do non-chest branches get any benefit under CDES?
Yes. Non-chest branches that deposit soiled notes or distribute coins through a linked currency chest receive a pro-rata share of the incentives from the chest branch. The chest branch must pass on the applicable fees for soiled note packets, mutilated notes, and coin distribution to the linked branches.