RBI Asks Banks to Supply 40% of Currency Notes to Rural Areas

The directive comes days after PM Modi asked banks to focus on rural areas.

To mitigate hardships of the poor and marginal farmers due to the cash deficit following demonetisation, the Reserve Bank on Tuesday directed banks to distribute at least 40 percent of currency notes in rural areas.

The 50-day period for ensuring normalcy ended on 30 December, 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 the number of banknotes being supplied in rural areas is not commensurate with the local requirement, some steps have already been initiated, RBI said in a notification.

To mitigate the issue in a more enduring manner, the banks maintaining currency chests have been advised to take various steps, including liberal issuance of the existing stock of other denomination notes below Rs 100.

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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, which are considered as main rural channels of distribution, on a priority basis.

RBI Notification

The directive came just a couple of days after Prime Minister Narendra Modi, in his address to the nation on New Year’s Eve, exhorted banks to make efforts to restore normalcy as fast as possible and asked them to 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.

Prime Minister Narendra Modi

According to the statement, banks should follow a 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.

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

Accordingly, all banks operating in a district must issue banknotes 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 a daily basis.

RBI Notification

Banks should issue banknotes in denominations of Rs 500 and below, the RBI notification said.