RBI asks banks to supply at least 40% of currency to rural areas
The Reserve Bank of India (RBI) asked banks on Tuesday to ensure that at least 40% of the bank notes are supplied to rural areas in denominations of Rs 500 and below.business Updated: Jan 03, 2017 15:20 IST
The RBI on Tuesday asked banks to give priority to rural areas in supplying cash and ensure that at least 40% of the bank notes issued are in denominations of Rs 500 and below in order to meet the shortage of currency notes after demonetisation.
The Reserve Bank of India observed that notes being supplied to rural areas of the country are “not commensurate” with the requirements of the rural population.
“... To mitigate the issue in a more enduring manner, the banks maintaining currency chests are advised to step up issuance of fresh notes to rural branches of RRBs (regional rural banks), DCCBs (district cooperative banks) and commercial banks, white label ATMs in rural areas and post offices in rural areas on a priority basis,” the RBI said.
The distribution should depend on variations in the rural and urban mix of each district in terms of relative shares in current and savings deposits and number of deposit accounts, it added.
The move follows an acute shortage of cash in rural areas after the government’s demonetisation that scrapped Rs 500 and Rs 1,000 bank notes and brought transactions to a standstill as the rural economy is mostly cash based.
“Currency chests should issue bank notes in denominations of Rs 500 and below. In particular ATMs, including WLAs, may be issued Rs 500s and Rs 100s and among ATMs category, off-site ATMs should be allocated higher proportion of cash as against on site ATMs as they are more important in the last mile currency connectivity,” the central bank said.
It also said existing stock of other denominations notes below Rs 100 should also be issued liberally and added that banks should also indent for coins from RBI and ensure supply to public on a priority basis.
The central bank had issued Rs 5.9 lakh crore in new currency across denominations till December 19 but it was well below Rs 15.4 lakh crore withdrawn after the government’s November 8 decision to scrap the two high-value currency notes.
Prime Minister Narendra Modi’s surprise announcement to recall these banknotes sparked chaos and confusion across the country, with millions of consumers queueing outside banks and ATMs to change a limited number of old notes for new ones or withdraw cash.
The government said the move was aimed at rooting out black money and corruption.
Banks started accepting deposits in scrapped notes from November 10. However, very few ATMs opened on November 11, as most of the machines had to be recalibrated for dispensing the new Rs 2,000 and Rs 500 notes.
Although the overall situation at banks has improved, ATMs still have to do some catching up. Many vending machines are still out of cash.
The RBI on Friday raised the daily ATM cash withdrawal limit from Rs 2,500 to Rs 4,500 a day for an individual from January 1. However, there was no change announced for the weekly withdrawal limit of Rs 24,000 in banks for individuals and Rs 50,000 for small traders.