Currency chest is the place where the RBI kept all the excess money of banks under custody. Whenever, RBI prints new currency notes, first it delivers to currency chests and then currency chests deliver these new currency notes to banks. A currency chest is a depositary of RBI. It’s not possible for RBI to reach everywhere so it authorized PSU banks to operate currency chests on its behalf. The bank, however, must maintain separate account independently of the chest which is monitored by RBI. As of March 2016, there were 4102 currency chests and 3783 Small coin depots.
Functions of Currency Chest
- The foremost function of the RBI is to deliver currency notes across the country. It has to distribute new currency notes and recycle old notes, keep cash reserves of banks.
- Currency chest act as networks of currency distribution.
- The other function of currency chest is to facilitate note supply. It helps to undertake smooth supply of currency notes across the country. The cash reserve ratios of commercial banks are also kept at currency chests.
- Currency chest are located at authorized selected branches of scheduled banks they do their function on behalf of RBI and they also store the currency as well as notes.
- The currency chests are expected to distribute banknotes and rupee coins to other bank branches in their area of operation.
- Currency chest also helps in exchanging mutilated notes and withdraw unfit notes.
Some more information related to Currency Chests
- The Department of Currency Management in RBI is responsible for administering the functions of currency management. This work is performed through 18 issue offices of the RBI. The RBI also coordinate with the government in designing the bank notes and security features. In terms of section 25 of RBI Act 1934, the design of our banknotes is required to be approved by the Central Government on the recommendation of the Central Board of Reserve Bank of India.
Infrastructure at Currency Chests
- It should be ensured that necessary infrastructure facilities like ultra-violate lamp, weighing machine, dual display note counting machines, sorting machines for proper sorting/identification of suspect notes are provided at currency chest branches.
Currency Chests System
- The RBI carries out the function of currency management through its network of issue offices and currency chests. Each issue office of RBI is responsible for the supply and withdrawal of banknotes and coins from the chests in its circle. The requirement of currency chests is at times met by arranging supplies from other surplus chests by issuing diversion orders by issue offices.
Steps taken by RBI to improve the quality of bank notes:
- Clean Note Policy: In November 2001, the RBI issued to all banks a directive in public interest preventing the stapling of bank notes and by the end of July 2003 more than 4400 currency chests had destapled the stock of notes lying in their chambers.
- Security and Controls: Installation of Close Circuit Television (CCTV) in the currency chests and security sealing of fresh note packets to enable visual inspection and taking over remittance without opening the bundles or packets.
- Distribution of Currency: Direct supply of fresh notes from the press to currency chests to reduce transit risk.
