Demonetisation: India's central bank directs banks to supply at least 40% of notes to rural areas

PTI Mumbai, Maharashtra, India Jan 03, 2017, 12.48 PM(IST)

RBI said banks should follow need-based approach for supply of currency to rural areas. Photograph:( AFP )

To mitigate hardships of poor and marginal farmers due to cash deficit following demonetisation, the Reserve Bank of India (RBI) today directed banks to distribute at least 40 per cent of currency notes in rural areas.

The 50-day exercise ended on December 30, but the cash supply situation is yet to ease in certain pockets. As a result, the government has not lifted the withdrawal ceiling of Rs 24,000 per week.

On observing that bank notes being supplied to rural areas is not commensurate with the local requirements, some steps have already been initiated, RBI said in a notification.

With a view to ensuring at least 40 per cent bank notes are supplied to rural areas and mitigating the issue in a more enduring manner, the banks maintaining currency chests are advised various steps, including liberal issuance of the existing stock of other denomination notes below Rs 100.

"Banks should advise their currency chests to step up issuance of fresh notes to rural branches of regional rural banks (RRBs), district central cooperative banks (DCCBs) and commercial banks, white label ATMs and post offices in rural areas on a priority basis which are considered as main rural channels of distribution," it said.

The directive came just a couple of days after Prime Minister Narendra Modi in his address to the nation on the eve of new year exhorted banks to make efforts to restore normalcy as fast as possible and should focus on rural areas.

"I have asked all officers concerned in the government to focus their attention on this task. They have especially been told to proactively resolve the problems in rural and remote areas," Modi had said.

According to the statement, banks should follow need-based approach for supply of currency as rural requirements could vary from district to district, depending on variations in the rural and urban mix of each district.

Each district has different proportion of current account and savings account in their banks.

RBI has already mapped each district of every state and also made estimates of the requirement.

Accordingly, all chests operating in a district must issue bank notes to distribution channels in the indicated proportion, it said.

"The indicated proportion may be maintained on a weekly average basis at each chest level as it may be difficult to stick to the proportion on daily basis," it added. 

Chests should issue bank notes in denominations of Rs 500 and below, the RBI notification said.

Particular ATMs, including those run by white label ATM operators, may be issued Rs 500 and Rs 100 notes and in the ATM category, off-site ones should be allocated a higher proportion of cash as against on-site as they are more important in last-mile currency connectivity, it added.

About reporting, it said currency chests must furnish daily issuance to their Link Offices (LOs) along with chest slips with a weekly summary at the close of business every Friday.

"Banks should indent for coins, obtain supply from Issue Department of RBI, if required, and ensure supply to public on priority basis," it said.