TITLE: India's Reserve Bank Issues Master Direction on Penal Interest for Currency Chest Transaction Reporting
BODY:
On April 1, 2021, the Reserve Bank of India (RBI) issued a Master Direction establishing penalties for banks with currency chests that fail to report transactions accurately and on time. The direction applies to all banks operating currency chests in India and is issued under Section 45 of the RBI Act, 1934 and Section 35A of the Banking Regulation Act, 1949, in support of the RBI's Clean Note Policy.
The Master Direction establishes strict reporting requirements and associated penalties. Banks must report all currency chest transactions through the CyM-CC portal on the same business day by 7 pm, with minimum transaction amounts of ₹1,00,000 and thereafter in multiples of ₹50,000. The RBI levies penal interest at 2 percent over the prevailing Bank Rate for delayed, incorrect, or non-reported transactions, calculated on a T+0 basis. Additional fixed penalties of ₹50,000 apply for specific violations, including wrongly reporting soiled note remittances as withdrawals and incorrect reporting of currency chest diversions. Banks that include ineligible amounts in chest balances—such as cash held in sealed covers or under individual lock and key rather than jointly held—face penal interest from the date of inclusion until exclusion.
The direction establishes that representations for penalty waiver will not be considered for wrong reporting cases. Banks may submit representations for delayed reporting only on grounds of genuine difficulties in hilly or remote areas or those affected by natural calamities, within one month of penalty debit through their controlling office to the relevant Issue Office. The Master Direction is available on the RBI website and will be updated as new instructions are issued.