The RBI Master Direction establishes a regulatory framework governing cash distribution, exchange, and management activities by banks, directly affecting cash access and handling rules.
The scheme incentivizes bank branches and currency chests to provide improved currency distribution services, which relates to the operational infrastructure supporting cash-based payments.
Specialism
This update concerns RBI incentive schemes for currency distribution and exchange activities, which falls outside the scope of payments compliance regulation as defined in the taxonomy.
While the update involves RBI guidance, it does not address payment service provider compliance, transaction monitoring, fraud prevention, sanctions screening, or any other core payments regulatory domain.
2026-04-20 08:47:38·pthandapani@vixio.com
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Master Directions - Reserve Bank of India
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TITLE: Reserve Bank of India Issues Master Direction on Currency Distribution and Exchange Scheme Incentives
BODY:
On April 3, 2023, the Reserve Bank of India (RBI) issued a Master Direction establishing a framework of incentives for the Currency Distribution and Exchange Scheme (CDES). The scheme aims to encourage all bank branches, including currency chests, to provide improved customer service in the distribution and exchange of currency notes and coins, in alignment with the RBI's Clean Note Policy objectives.
The CDES provides financial incentives and service charges for banks undertaking specified currency management activities. For currency chest establishment and maintenance in centres with populations below 100,000 in underbanked states, banks receive 50 percent reimbursement of capital expenditure (capped at ₹50 lakh per chest, inclusive of taxes), with the North Eastern region eligible for up to 100 percent reimbursement. Revenue cost reimbursement of 50 percent is available for the first three years, extending to five years in the North Eastern region. For over-the-counter exchange of soiled notes, banks receive ₹2 per packet for denominations up to ₹50. Adjudication of mutilated notes attracts ₹2 per piece. Coin distribution incentives are set at ₹65 per bag, with an additional ₹10 per bag for distribution in rural and semi-urban areas upon submission of a Concurrent Auditor certificate. Non-chest branches depositing cash under the Linkage scheme with currency chests incur service charges of ₹8 per 100 pieces at large modern currency chests or ₹5 per 100 pieces at other currency chests.
Incentives are payable based on currency actually received at RBI Issue Offices. Currency chest branches distribute incentives to linked branches on a pro-rata basis. The RBI will verify coin distribution through inspections and incognito visits.
**Reference:** Reserve Bank of India Master Direction RBI/2023-24/99 DCM (CC) No.G-5/03.41.01/2023-24, April 3, 2023
Master Directions - Reserve Bank of India Skip to main content Selected Selected Language हिंदी Search the Website Search Master Directions ( 264 kb ) Master Direction on Framework of Incentives for Currency Distribution & Exchange Scheme for bank branches including currency chests based on performance in rendering customer service to the members of public RBI/2023-24/99 DCM (CC) No.G-5/03.41.01/2023-24 April 03, 2023 The Chairman/Managing Director/Chief Executive Officers, All banks Madam / Dear Sir, Master Direction on Framework of Incentives for Currency Distribution & Exchange Scheme for bank branches including currency chests based on performance in rendering customer service to the members of public In terms of the Preamble to and Section 45 of the RBI Act, 1934 and Section 35 A 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 enclosed Master Direction incorporates updated guidelines / circulars on the subject. Yours faithfully, (Sanjeev Prakash) Chief General Manager Encl: As above Annex Master Direction on Framework of Incentives for “Currency Distribution & Exchange Scheme (CDES)” for bank branches including currency chests based on performance in rendering customer service to the members of public 1. The framework of incentives titled Currency Distribution & Exchange Scheme (CDES) for bank branches including currency chests 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: Sr. No. Nature of Service Particulars of Incentives/Service Charges i) Opening of and maintaining currency chests at centres having population of less than 1 lakh, in underbanked states a. Capital Cost: Reimbursement of 50% of capital expenditure subject to a ceiling of ₹50 lakh per currency chest (inclusive of all taxes). In the North Eastern region, up to 100% of capital expenditure is eligible for reimbursement subject to the ceiling of ₹50 lakh (inclusive of all taxes). b. Revenue cost: Reimbursement of 50% of revenue expenditure for the first 3 years (inclusive of all taxes). In the North Eastern region, 50% of revenue expenditure is eligible for reimbursement for the first 5 years (inclusive of all taxes). ii) Exchange of soiled notes / adjudication of mutilated notes over the counter at bank branches. A. Exchange of soiled notes – ₹2 per packet for exchange of soiled notes up to denomination of ₹50 b. Adjudication of mutilated notes – ₹2 per piece iii) Distribution of coins. i. ₹65 per bag for distribution of coins. ii. An additional incentive of ₹10/- per bag shall be paid for coin distribution in rural and semi-urban areas on the submission of a Concurrent Auditor (CA) certificate to this effect. iv) Cash deposit by non-chest branches under Linkage scheme with CCs Service charge to be levied by the CC on the non-chest branches a. Large modern CCs 1 - ₹8/- per 100 pieces b. Other CCs - ₹5/- per 100 pieces 3. Other operational instructions on payment of performance-based incentives The incentives shall be paid on the soiled notes actually received in the Issue Office of the RBI. 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. The incentive for distribution of coins shall be paid on the basis of net withdrawal from the currency chest. Banks do not need to submit a separate claim for the incentives. Currency chest branch shall pass on the incentive to the linked branches/chests for the soiled notes tendered / coins distributed/ mutilated notes adjudicated by them on pro-rata basis. The distribution of coins shall be verified by RBI Regional Offices through inspection of currency chest / incognito visits to branches, etc. Instructions issued vide circular DCM(CC) No.97527/03.41.01/2021-22 dated August 27, 2021 remains unchanged. 1 Large modern CCs are those CCs which fulfil the Minimum Standards for a CC as detailed in the circular RBI/2018-19/166 DCM(CC) No. 2842/03.39.01/2018-19 dated April 08, 2019. 2026 2025 2024 2023 2022 2021 2020 2019 2018 2017 Archives 2016 2015 Top Back to previous page