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M. Ramesh

CHENNAI, May 23

BANKS have been asked to take over the currency chests which are at present managed by the various State Government treasuries, sources in the RBI told Business Line today. This, it is understood, is part of the RBI's `clean note policy'.

Sources said that there were 311 currency chests with the banks in the southern region (the four southern States) and 65 more with State Governments' treasuries. Actually, there were 90 currency chests with the State Governments, but recently the State Bank of India took over 25 of them.

A currency chest is a safe that actually belongs to the RBI, but is kept in a bank's premises and maintained by the bank, on behalf of the RBI. Since the stock of notes and coins held by the currency chests is taken into account for working out the cash reserve requirements of the banks concerned, this also allows the bank branches to operate on a lower cash balance.

On the flipside, the bank will have to find enough space for keeping a currency chest — a `strong room' is required, with all the security required and the police (who will guard the chests) will have to be notified. There are costs associated with this.

Currency chests come in different sizes too — those that are housed in strong rooms of 400 sq.ft, 300 sq.ft and 150 sq. ft. As such, the amount of currencies they hold also varies. For example, one of the larger currency chests in Chennai holds about Rs 1,000 crore, while the Kolkata branch of the SBI holds "tens of thousands of crores".

Today, at least in the South, there is a currency chest for every 70 bank branches, which speaks of the scope for more currency chests. The RBI is, therefore, asking banks to get more currency chests.

According to the RBI, the number of currency chests operated by commercial banks and Government treasuries increased to 4,422 as at end-March 2002 from 4,386 as at end-March 2001. The State Bank of India (SBI) and its associate banks maintain a bulk of these currency chests (almost 70 per cent of total currency chests) followed by nationalised banks (19 per cent).

The dominance of the SBI and its associate banks is also reflected in the fact that this group has about 23 per cent of its branches as currency chest branches whereas other nationalised banks have only three per cent of their branches operating as currency chests. "Efforts are being made to persuade the public sector banks (PSBs) to open more currency chests for improving the efficacy of the distribution network," sources in the RBI say.

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