Master Direction on Incentives for Currency Distribution and Exchange and Penalties / Penal Provisions for Bank Branches and Currency Chests for Deficiency in Rendering Customer Service and Reporting of Transactions / Balances (Updated as on May 27, 2026)
UR
- Applies toAll regulated entities
- StatusIn force
- ImportanceFOR INFORMATION
- IssuedApr 01, 2026
- Amendmentsnone tracked
- Length32 points in 5 sections · 3 min read
The four dates on this rule
- PublishedApr 01, 2026The day RBI put this document out.
- Starts to applyNot statedNot stated separately in this document. Read the rule itself before you assume a start date.
- Time to get readyNot statedCannot be worked out until the day it starts to apply is known.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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Numbers to remember
| ₹50 lakh | Opening a chest in the North-East or hill areas gets back up to 100% of cost, capped at ₹50 lakh. RBI Chapter II, Para 1 (incentive table) |
| 5 years | Running costs for a new chest get 50% back for the first 5 years. RBI Chapter II, Para 1 (incentive table) |
| ₹50 | Exchanging soiled notes of ₹50 or less earns the branch ₹2 per packet. RBI Chapter II, Para 1 (incentive table) |
| ₹2 | Fixing a mutilated note earns the branch ₹2 per piece. RBI Chapter II, Para 1 (incentive table) |
| ₹10 | Rural and semi-urban coin distribution earns ₹10 extra per bag, with an auditor's certificate. RBI Chapter II, Para 1 (incentive table) |
| ₹5 lakh | More than 5 poor-service cases at a branch in a year costs ₹5 lakh. RBI Chapter III, Para 1.1 |
| ₹10,000 | Each fake note found in an ATM or over the counter costs the bank ₹10,000. RBI Chapter III, Para 1.2 |
| ten hours | An ATM empty for more than ten hours in a month costs ₹10,000. RBI Chapter III, Para 2.1 |
| ₹50,000, | Chest deposits and withdrawals start at ₹50,000, then move in steps of ₹10,000. RBI Chapter IV, Para 1.1 |
| ₹50,000 | Wrongly typed transaction reports draw a flat ₹50,000 penalty. RBI Chapter IV, Para 3.3 |
What it says
Opening paragraphs
1. Old circulars withdrawn
This Direction replaces every earlier circular on the same subject.
Chapter I. Preliminary
Must know
1. Applies to all banks
The incentive and branch-penalty rules apply to every bank.
2. CC rules need a CC
The currency-chest penalty rules apply only to banks that run a chest.
Background
3. What this Direction covers
This Direction sets the incentive and penalty rules for currency chests and ATMs.
4. What a currency chest is
RBI picks certain banks to run currency chests that store notes and coins.
5. What counts as mutilated
A mutilated note is missing a part or is made of more than two pieces.
6. What counts as imperfect
An imperfect note is damaged, faded or altered, but is not a mutilated note.
Chapter II. Scheme of Incentives
Must know
1. Capital cost reimbursed, capped
Opening a chest in the North-East or hill areas gets back up to 100% of cost, capped at ₹50 lakh.
BankPulse example. RBI's own example: a bank claimed ₹75 lakh for opening a chest. Reimbursement is 100% of that, but capped at ₹50 lakh, so RBI pays back ₹50 lakh, not the full ₹75 lakh.
2. Running costs reimbursed too
Running costs for a new chest get 50% back for the first 5 years.
3. Paid for exchanging soiled notes
Exchanging soiled notes of ₹50 or less earns the branch ₹2 per packet.
4. Paid for fixing mutilated notes
Fixing a mutilated note earns the branch ₹2 per piece.
5. Extra pay for rural coins
Rural and semi-urban coin distribution earns ₹10 extra per bag, with an auditor's certificate.
Do it
6. Branch must pass on incentive
The chest branch must share its incentive with linked branches, in proportion to their work.
Chapter III. Penalties for deficiency in rendering customer service
Must know
1. Poor service can cost lakhs
More than 5 poor-service cases at a branch in a year costs ₹5 lakh.
2. Fake notes cost ten thousand
Each fake note found in an ATM or over the counter costs the bank ₹10,000.
3. Empty ATM ten hours penalty
An ATM empty for more than ten hours in a month costs ₹10,000.
4. Missing small notes cost double
A missing note of ₹50 or less costs ₹50 per piece, on top of the loss.
5. Missing coins cost full value
A missing coin of any value costs its full value, on top of the loss.
6. Cut notes cost fifty rupees
A cut or built-up note costs ₹50 per piece, on top of the loss, whatever its value.
7. Repeat CCTV lapse doubles fine
A repeat CCTV or audit lapse raises the fine to ₹10,000.
8. Breaking MoA terms costs lakhs
More than 5 broken agreement terms by a chest in a row costs ₹5 lakh.
9. Minimum chest deposit fifty thousand
Chest deposits and withdrawals start at ₹50,000, then move in steps of ₹10,000.
10. Late reporting costs two percent
Late or wrong reporting draws interest at 2% above RBI's Bank Rate.
11. Wrong reporting is flat penalty
Wrongly typed transaction reports draw a flat ₹50,000 penalty.
Do it
12. Bank must report ATM downtime
Banks and ATM operators must send RBI a monthly downtime report for cash-out ATMs.
13. Same-day reporting by seven pm
Chests must report every transaction on the CyM-CC portal the same day by 7 pm.
Background
14. Rule reaches ATM operators too
This fake-note penalty also covers White Label ATM Operators.
15. White label ATMs covered too
This cash-out penalty also covers White Label ATM Operators.
Chapter V. Operational Guidelines on Levy of Penalty/ Penal Interest
1. One month to appeal
An appeal must be filed within one month of the penalty.
2. Staff inexperience is no excuse
New or untrained staff is not a valid reason to waive a penalty.
3. Clerical error is no excuse
A clerical or typing mistake is not a valid reason either.
4. Genuine hardship can get hearing
A genuine reason, like a lockdown or strike, can still get a hearing.