The update concerns RBI guidelines for banks' management and distribution of physical currency (notes and coins), which directly falls under cash-based payment methods regulation.
Low confidence — requires human review. While banks are involved, this is primarily about cash distribution incentives rather than bank account regulation or banking services broadly.
Specialism
This update concerns currency distribution incentives and note/coin exchange procedures for banks, which falls outside the scope of payments compliance regulation as defined in the taxonomy.
While the RBI issues guidance, this update does not address payment service provider compliance, transaction monitoring, fraud prevention, sanctions screening, cybersecurity, data protection, or any other payments-specific regulatory domain.
2026-04-20 08:47:11·pthandapani@vixio.com
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Master Directions - Reserve Bank of India
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TITLE: Reserve Bank of India Updates Currency Distribution and Exchange Scheme Guidelines
BODY:
On July 1, 2019, the Reserve Bank of India (RBI) issued updated Master Directions on the Currency Distribution and Exchange Scheme (CDES), with the most recent update effective January 6, 2020. The scheme establishes performance-based financial incentives for banks to improve customer service in the exchange of notes and coins, aligned with the RBI's Clean Note Policy objectives.
Under the CDES, banks are eligible for financial incentives across three service categories. For opening and maintaining currency chests in underbanked states with populations below 100,000, banks receive reimbursement of 50 percent of capital expenditure (capped at ₹50 lakh per chest), with the North Eastern region eligible for up to 100 percent reimbursement. Revenue cost reimbursement is available at 50 percent for the first three years, extending to five years in the North Eastern region. For over-the-counter exchange of soiled notes and adjudication of mutilated banknotes, banks receive ₹2 per packet for soiled notes up to ₹50 denomination and ₹2 per piece for adjudicated notes. For coin distribution over the counter, banks receive ₹25 per bag, with incentives paid automatically based on withdrawals from currency chests without requiring separate claims.
The scheme requires currency chest branches to distribute incentives to linked branches on a pro-rata basis. Banks must implement checks and balances to ensure coins are distributed to retail customers in small lots rather than bulk customers. The RBI Regional Offices verify coin distribution through currency chest inspections and incognito branch visits. The Master Direction is available on the RBI website and will be updated as fresh instructions are issued.
REFERENCE:
Reserve Bank of India. Master Direction on Currency Distribution & Exchange Scheme (CDES). Available at: www.rbi.org.in
Master Directions - Reserve Bank of India Skip to main content Selected Selected Language हिंदी Search the Website Search Master Directions ( 372 kb ) Master Direction on Currency Distribution & Exchange Scheme (CDES) based on performance in rendering customer service to the members of public (Updated as on January 6, 2020) RBI/2019-20/69 Master Direction DCM (CC) No.G-6/03.41.01/2019-20 July 01, 2019 (Updated as on January 6, 2020) The Chairman and Managing Director / Chief Executive Officers, All Banks Madam / Dear Sir, Master Direction on Currency Distribution & Exchange Scheme (CDES) based on performance in rendering customer service to the members of public In terms of the Preamble, under Section 45 of the RBI Act, 1934 and 35 A of the Banking Regulation Act, 1949, the Bank issues guidelines / instructions for realising the objectives of our Clean Note Policy. With a view to sustaining these objectives, the Bank has formulated a scheme of incentives titled Currency Distribution and Exchange Scheme (CDES) in order to ensure that all bank branches provide better customer services to members of public. 2. The Master Direction enclosed incorporates updated guidelines / circulars on the subject. The Direction will be updated from time to time as and when fresh instructions are issued. 3. This Master Direction has been placed on RBI website at www.rbi.org.in . Yours faithfully, (Manas Ranjan Mohanty) Chief General Manager Encl: As above Annex Circular on “Currency Distribution & Exchange Scheme (CDES)” for bank branches including currency chests based on performance in rendering customer service to members of public 1. The Currency Distribution & Exchange Scheme (CDES) for bank branches including currency chests has been formulated in order to ensure that all bank branches provide better customer service to members of public with regard to exchange of notes and coins, in keeping with the objectives of Clean Note Policy. 2. Incentives As per the scheme, banks are eligible for the following financial incentives for providing facilities for exchange of notes and coins: Sr. No. Nature of Service Particulars of Incentives i) Opening of and maintaining currency chests at centers having population of less than 1 lakh in under banked States a. Capital Cost: Reimbursement of 50% of capital expenditure subject to a ceiling of ₹ 50 lakh per currency chest. In the North Eastern region up to 100% of capital expenditure is eligible for reimbursement subject to the ceiling of ₹ 50 lakh. b. Revenue cost: Reimbursement of 50% of revenue expenditure for the first 3 years. In the North Eastern region 50% of revenue expenditure will be reimbursed for the first 5 years. ii) Exchange of soiled notes/ adjudication of mutilated banknotes over the counter at bank branches a. Exchange of soiled notes – ₹ 2 per packet for exchange of soiled notes up to denomination ₹ 50 b. Adjudication of mutilated notes – ₹ 2 per piece iii) Distribution of coins over counter i. ₹ 25 per bag for distribution of coins over the counter. ii. The incentives would be paid on the basis of withdrawal from currency chest, without waiting for claims from banks. iii. Banks may put in place a system of checks and balances to ensure that coins are distributed to retail customers in small lots and not to bulk customers. iv. The distribution of coins shall be verified by RBI Regional Offices through inspection of currency chest / incognito visits to branches etc. 3. Operational Guidelines to avail performance-based incentives – i) The incentives will be paid on the soiled notes actually received in the Issue Office of the RBI. Banks need not submit a separate claim in this regard. Currency chest branch will have to pass on the incentive to the linked branches for the soiled notes tendered / coins distributed by them on a pro-rata basis. ii) Similarly, incentive will be paid in respect of the adjudicated notes received along with the soiled note remittances / sent separately by registered / insured post in a sealed cover to the RBI. No separate claim is required to be made. 2026 2025 2024 2023 2022 2021 2020 2019 2018 2017 Archives 2016 2015 Top Back to previous page