RBI plans firm for currency chests

The Reserve Bank of India (RBI) is in talks with banks for setting up a company for managing currency chests, to ensure better cash management. Currently, banks, mostly public sector ones, manage currency chests on behalf of RBI.

"Discussions are on between public, private and foreign banks. Things are at a conceptual stage and will materialise by end of December 2005," said a senior official with a foreign bank. RBI is unlikely to have a stake in the currency chest company and would focus more its regulatory aspects, another banker said.

An independent currency chest will help banks which have not received permission for their own currency chests and also those which cannot share currency chests of other banks.

Banking sources estimate that a single such currency chest can hold up to Rs 200-300 crore at a time. The annual requirement of cash in ATMs alone exceeds Rs 1,50,000 crore. Security is the key concern in involving a non-banking entity in currency management.

The demand for currency notes is on the rise and banks are also considering enhancing the capacities of their currency chests. The needs are growing with growing retail operations and need for cash of cooperative and foreign banks, railways and Life Insurance Corporation and the requirements for commodity/bullion trade.

The other alternative that state-run banks can look at is sharing their chests with other state-owned banks in the same vicinity. "Even in such a situation, disposing off mutilated currencies becomes cumbersome because in certain cases, State Bank of India also refuses to co-operate with us," informed a source.

There are 4,422 currency chests and 3,784 small coin depots across the country. The currency chests and small coin depots distribute coins to public, customers and other bank branches in their area of operation.