The update concerns cash handling, distribution, and exchange infrastructure operated by banks under RBI incentive schemes, which directly relates to cash-based payment methods and access.
The scheme involves bank operations and infrastructure (currency chests) for managing physical currency, which relates to bank account services and cash access infrastructure.
Specialism
This update concerns RBI incentive schemes for physical currency distribution and note exchange services, which falls outside the scope of payments compliance regulation as defined in the taxonomy.
While the scheme involves banks and financial incentives, it does not address payment services, payment firms, or any of the core regulatory compliance areas covered by the payments compliance taxonomy.
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 Issues Master Direction on Currency Distribution and Exchange Scheme
BODY:
On July 3, 2018, the Reserve Bank of India (RBI) issued a Master Direction on the Currency Distribution and Exchange Scheme (CDES) to incentivise banks to provide improved customer service in the exchange of notes and coins. The scheme was formulated under Section 45 of the RBI Act, 1934 and Section 35A of the Banking Regulation Act, 1949, to support the RBI's Clean Note Policy objectives.
The CDES provides financial incentives to banks for three categories of service. First, banks opening and maintaining currency chests in centres with populations below 100,000 in underbanked states receive reimbursement of 50 percent of capital expenditure, subject to a ceiling of ₹50 lakh per currency chest. In the North Eastern region, reimbursement extends to 100 percent of capital expenditure. Revenue cost reimbursement of 50 percent is available for the first three years, or five years in the North Eastern region. Second, banks exchanging soiled notes receive ₹2 per packet for denominations up to ₹50, and ₹2 per piece for adjudication of mutilated banknotes. Third, banks distributing coins over the counter receive ₹25 per bag. The scheme specifies that incentives are paid based on actual soiled notes received at RBI Issue Offices without requiring separate claims from banks. Currency chest branches must distribute incentives to linked branches on a pro-rata basis. The RBI will verify coin distribution through inspections and incognito visits to branches to ensure coins are distributed to retail customers in small lots rather than bulk customers.
The Master Direction has been published on the RBI website and will be updated as fresh instructions are issued.
Master Directions - Reserve Bank of India Skip to main content Selected Selected Language हिंदी Search the Website Search Master Directions ( 57 kb ) Master Direction on Currency Distribution & Exchange Scheme (CDES) based on performance in rendering customer service to the members of public RBI/DCM/2018-19/63 Master Direction DCM (CC) No.G-3/03.41.01/2018-19 July 3, 2018 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 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