TITLE: Reserve Bank of India Issues Master Direction on Penal Interest for Currency Chest Reporting Failures
BODY:
On July 3, 2018, the Reserve Bank of India (RBI) issued a Master Direction establishing guidelines for levying penal interest on banks and treasury offices for delayed, incorrect, or non-reporting of currency chest transactions. The direction was issued under Section 45 of the RBI Act, 1934 and Section 35A of the Banking Regulation Act, 1949, as part of the RBI's Clean Note Policy implementation.
The Master Direction establishes reporting requirements and penalties applicable to all banks maintaining currency chests and state government treasury offices. Currency chest transactions must be reported through the Integrated Currency Chest Operations Management System (ICCOMS) by 9 PM on the same business day, with link offices consolidating positions by 11 PM. Minimum deposit or withdrawal amounts are set at ₹100,000, with subsequent transactions in multiples of ₹50,000.
Penal interest is levied at 2 percent over the prevailing Bank Rate for delayed, wrong, or non-reported transactions. For instances where currency chests report net deposits with delays, a flat penalty of ₹50,000 applies instead of penal interest. Wrong reporting of soiled note remittances or diversions as withdrawals incurs a ₹50,000 penalty regardless of transaction value or reporting duration. Penal interest also applies when ineligible amounts are included in chest balances, including cash held in sealed covers or under locks other than those of joint custodians.
Banks may submit representations requesting reconsideration within one month of penalty debit, though representations for wrong reporting waivers are not considered. The RBI retains discretion to grant grace periods for penal interest levy in appropriate circumstances.