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Currency chest

Topics Covered:

  1. Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.


Currency chest


What to study?

For Prelims: Currency chest- features.

For Mains: Need and significance.


Context: The Reserve Bank of India is planning to allow large modern currency chests to increase the service charges on cash deposited by non-chest bank branches from the existing rate of ₹5 per packet of 100 pieces to a higher rate subject to a maximum of ₹8 per packet. For this, only a currency chest (CC) that fulfils the minimum standards will be eligible to be classified as a large modern CC.


What are Currency chests?

Currency chests are branches of selected banks authorised by the RBI to stock rupee notes and coins.


Who determines the number of notes and coins to be printed?

The responsibility for managing the currency in circulation is vested in the RBI.

  1. The central bank advises the Centre on the number of notes to be printed, the currency denominations, security features and so on. The number of notes that need to be printed is determined using a statistical model that takes the pace of economic growth, rate of inflation and the replacement rate of soiled notes.
  2. The Government has, however, reserved the right to determine the amount of coins that have to be minted.


Role of currency chests:

  • The RBI offices in various cities receive the notes from note presses and coins from the mints. These are sent to the currency chests and small coin depots from where they are distributed to bank branches.
  • The RBI has set up over 4,075 currency chests all over the country. Besides these, there are around 3,746 bank branches that act as small coin depots to stock small coins.


Reserve Bank of India (RBI) recently issued new guidelines for banks to set up new currency chests. They include:

  • Area of the strong room/ vault of at least 1,500 sq ft. For those situated in hilly/ inaccessible places, the strong room/ vault area of at least 600 sq ft.
  • The new chests should have a processing capacity of 6.6 lakh pieces of banknotes per day. Those situated in the hilly/ inaccessible places, a capacity of 2.1 lakh pieces of banknotes per day.
  • The currency chests should have Chest Balance Limit (CBL) of Rs 1,000 crore, subject to ground realities and reasonable restrictions, at the discretion of the Reserve Bank.


Sources: the Hindu.