RBI/DCM/2025-26/136
DCM (CC) No.G-3/03.41.01/2025-26

April 24, 2025

The Chairman / Managing Director / Chief Executive Officer
All banks

Madam / Dear Sir,

Master Direction on Framework of incentives for Currency Distribution & Exchange Scheme for bank branches including currency chests

In terms of the Preamble to and Section 45 of the Reserve Bank of India Act, 1934 (RBI Act) and Section 35A of the Banking Regulation Act, 1949, Reserve Bank of India issues guidelines / instructions for realising the objectives of Clean Note Policy as part of currency management. With a view to furthering these objectives, the Bank has formulated a framework of incentives titled Currency Distribution and Exchange Scheme (CDES) to encourage all the bank branches to provide better customer services to the members of public.

2. The Master Direction incorporating the updated guidelines / circulars on the subject is at Annex-I. The Frequently Asked Questions (FAQs) and few Illustrations are at Annex-II and III respectively.

Yours faithfully,

Encl: As above

Annex-I

Master Direction on Framework of Incentives for “Currency Distribution & Exchange Scheme (CDES)” for bank branches including currency chests

1. The framework of incentives, titled Currency Distribution & Exchange Scheme (CDES) for bank branches including Currency Chests (CCs), based on performance in rendering customer service to the members of public has been formulated to encourage all the bank branches to provide better customer service to the members of public keeping in view the objectives of Clean Note Policy.

2. Incentives

As per the scheme, banks are eligible for the following financial incentives / service charges for setting up requisite infrastructure and facilitating exchange / distribution of notes and coins:

3. Other operational instructions on payment of performance-based incentives

1. The incentives shall be paid on the soiled notes actually received in the Issue Office of the RBI.

2. Incentive shall be paid in respect of the adjudicated notes received along with the soiled note remittances or sent separately by registered / insured post in a sealed cover to the RBI.

3. The incentive for distribution of coins shall be paid on the basis of net withdrawal from the currency chest.

4. The CC holding banks shall raise invoice to RBI for claiming incentives. All other instructions issued vide circular DCM(CC) No.97527/03.41.01/2021-22 dated August 27, 2021 remain unchanged.

5. Currency chest branch shall pass on the incentive to the linked branches for the soiled notes deposited / coins distributed / mutilated notes adjudicated by them on pro-rata basis.

6. The distribution of coins shall be verified by RBI Regional Offices through inspection of currency chests / incognito visit to branches, etc.

Annex-II

Frequently Asked Questions

Master Direction on Framework of Incentives for “Currency Distribution & Exchange Scheme (CDES)” for bank branches including currency chests

1. What is Clean Note Policy?

It is a policy adopted by RBI to ensure availability of good quality banknotes to members of the public.

2. What is included in capital and revenue cost?

Capital costs are one-time expenditures incurred for acquiring fixed assets or infrastructure necessary to set up Currency Chest. Revenue costs are recurring expenses incurred on day-to-day operations and maintenance of Currency Chest. The actual nature of expenditure shall be ascertained by the Issue Office concerned at the time of reimbursement of cost to the bank.

Annex-III

Illustrations

1. Opening and operating CCs in North Eastern region / at inaccessible / hilly places (as considered by State Governments/ any appropriate authority) of Jammu and Kashmir/ Ladakh Union Territories:

Illustration 1: Reimbursement of Capital Expenditure

Capital Cost incurred and claimed by the bank: ₹75 lakh (inclusive of taxes)  (A)

Capital Cost to be reimbursed:  100% of (A) (subject to a ceiling of ₹50 lakh per CC) = ₹50 lakh (inclusive of taxes)

Illustration 2: Reimbursement of Revenue Expenditure

2. Incentive for Exchange of soiled notes / adjudication of mutilated notes over the counter at bank branches:

Illustration1: Incentive for Exchange of soiled notes over the counter at bank branches

Illustration2: Incentive for adjudication of mutilated notes over the counter at bank branches

3. Incentives for distribution of coins:

Illustration:

Coin Distribution in Urban Area: Incentive Amount for 3 bags @ ₹65 per bag: ₹195 (before tax)

Coin Distribution in Semi-Urban/ Rural Area: Incentive Amount for 3 bags @₹75 per bag: ₹225 (before tax)

Note: In terms of para 5.1 of Chapter 3-Cash Department of lssue Department Manual 2021, 5000 pieces of 50 paise coins; 2500 pieces of ₹1, ₹2 or ₹5 coins; 2000 pieces of ₹10 or ₹20 coins would be deemed to constitute one bag.