All you wanted to know about currency chest

If you were among those making frequent trips to the bank in the last few days, you might have been told by a bank employee that money is on its way from the currency chest. Or you could have heard people say that all the 100 and 50 notes have disappeared from the currency chest. While these statements might conjure images of a shining golden chest, overflowing with currency notes and coins; the reality is a little dull.

Currency chests are branches of selected banks authorised by the RBI to stock rupee notes and coins. The responsibility for managing the currency in circulation is vested in the RBI. 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. The Government has, however, reserved the right to determine the amount of coins that have to be minted.

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.

Against the back-ground of the recent events in demonetising ₹1,000 and ₹500 notes, the question that arises is whether the RBI has adequate infrastructure for distributing the notes and if it is being done equitably.

Of the 4,075 currency chests in the country, 2,722 or 67 per cent are held in branches of the State Bank of India and its associate banks. Other Nationalised banks hold 1,173 chests, taking the share of the PSU banks to 95 per cent. Private sector banks (160), Co-operative banks (3) and foreign banks (4), regional rural banks (5) do not have a large role to play in stocking currency on behalf of RBI.

This might be alright in normal times as the currency chests have to be fair in supplying cash to all banks in the vicinity. But in crunch situations, such as the recent one, there are likely to be complaints from non-PSU banks about currency not being distributed equitably. The urban co-operative banks have recently been alleging that they are being allocated paltry sums from currency chests to cater to their clients.

The regional distribution of these chests also appears questionable as those living in rural areas too are complaining about non-availability of cash. With a number of small and payment banks on the anvil, ensuring that there are adequate number of currency chests in all parts of the country is an imperative.

Almost everyone has been hit by the ongoing cash-crunch. With the Modi sarkar vowing to continue its crack-down on black money, it could follow this move by yet another de-monetisation; of rupee notes of another denomination. It therefore pays to know how close your bank branch is to a currency chest.

It might also be good to avoid banking with smaller banks as they have to depend on larger banks for supply of notes. Customers of these banks could take a larger hit.

Make sure that your bank is well-linked to a currency chest. It will help you tide over a cash crunch much more easily.

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