The Reserve Bank of India has published a Master Direction consolidating updated guidelines for the Currency Distribution and Exchange Scheme (CDES), a performance-based incentive framework for bank branches and currency chests intended to improve customer service and support the Clean Note Policy. The framework sets out financial incentives and service charges covering four areas. For opening and operating currency chests in the North Eastern region and in inaccessible or hilly places in Jammu and Kashmir and Ladakh, eligible banks can claim reimbursement of up to 100% of capital expenditure subject to a ceiling of INR 50 lakh, and 50% of revenue expenditure for the first five years of operations. Over-the-counter exchange of soiled notes in denominations of INR 50 and below is incentivised at INR 2 per packet, while adjudication of mutilated notes is incentivised at INR 2 per piece. Coin distribution attracts INR 65 per bag, with an additional INR 10 per bag for rural and semi-urban distribution subject to a Concurrent Auditor certificate. Under the linkage scheme, currency chests levy service charges for cash deposits by non-chest branches of INR 8 per 100 pieces for large modern currency chests and INR 5 per 100 pieces for other currency chests. Operational instructions specify that incentives are calculated based on soiled notes actually received at the Reserve Bank’s Issue Office, coin distribution incentives are based on net withdrawals from the currency chest, and currency chest holding banks must invoice the Reserve Bank to claim amounts. The revised instructions on reimbursement for new currency chests in the specified areas apply to applications received on or after the Master Direction, while earlier applications continue under the guidelines in force when submitted.

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