To address the severe cash crunch in villages after demonetisation, the Reserve Bank of India has asked banks to ensure that at least 40 per cent of the bank notes are supplied to rural areas.
The RBI said currency chests should issue bank notes in denominations of ₹500 and below. In particular, ATMs should be stocked with ₹500s and ₹100s. Existing stock of other denominations below ₹100 should be issued liberally, it added.
The RBI said off-site ATMs should be allocated a higher proportion of cash compared with on-site ATMs as they play a crucial role in last-mile currency connectivity.
Banks should indent for coins, obtain supply from Issue Departments of Reserve Bank of India, if required, and ensure supply to public on priority basis.
In its notification on allocation of cash to rural areas, the RBI said, “Banks should advise their currency chests to step up issuance of fresh notes to rural branches of Regional Rural Banks (RRBs), District Central Co-operative Banks (DCCBs) and commercial banks, White Label ATMs in rural areas and post offices in rural areas on priority basis.”
The RBI’s currency management architecture comprises 19 issue offices, 4,075 currency chests (including sub-treasury offices and a currency chest of the Reserve Bank in Kochi) and 3,746 small coin depots at commercial, cooperative and regional rural banks, across India.
Among banks, the State Bank group has the maximum number of currency chests (2,722) and small coin depots (2,584). Nationalised banks have 1,173 currency chests and 993 small coin depots.
As rural requirements could vary from district to district, the RBI said a specific percentage of allocation has been assigned to each district depending on the rural and urban mix.
Accordingly, all chests operating in a district must issue bank notes to the rural channels of distribution in the indicated proportion.
The indicated proportion must be maintained on a weekly average basis at each chest level.
To ensure unhindered farming operations during the Rabi crop season, the RBI, on November 22, asked banks with currency chests to ensure adequate cash supply to the DCCBs and RRBs as many of the crop loans are disbursed in cash.
The RBI also said adequate cash supply should also be ensured for rural branches of all commercial banks (including RRBs).
Further, bank branches located in APMCs (Agricultural Marketing Produce Committees) may also be given adequate cash to facilitate smooth procurement.