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RBI regional offices can issue approvals for increasing money holding limits

The soiled notes are taking up more room in chests than issuable currency, indicating the need for immediate action, banks have informed the Reserve Bank of India (RBI), according to a report in The Economic Times. Despite the fact that total money in the system has increased, dirty currency notes are taking up more space, according to a top financial institution government official, who suggested raising the chest money holding restrictions until the dirty currency notes are removed.

“If dirty currency notes exceed a specific percentage of chest space, say 60%,” the banker explained, “RBI can adopt a policy decision to increase the cash holding limitations of currency chests.”

RBI regional offices can issue approvals for increasing money holding limits. The central bank has begun a ‘clear word coverage,’ which includes the automatic retrieval and processing of banknotes retrieved from foreign money chests, as well as the disposal of unclean banknotes.

There was a more-than-average increase in banknotes in circulation in 2020-21 as per the RBI report.

The value and number of banknotes in circulation increased by 16.8% and 7.2%, respectively, in 2020-21. As of March 31, 2021, the percentage of Rs 500 and Rs 2,000 banknotes in circulation stood for 85.7% of the total value of banknotes in circulation, compared to 83.4% a year earlier. The epidemic also impacted the disposal of dirty banknotes, according to the report, however, this was expedited in the later half of 2020-21.

A 32 percent decrease in the disposal of soiled banknotes throughout the year as compared to the previous year was observed in the report. There are currently 3,054 foreign money chests, with the State Bank of India accounting for 55%. (SBI).

Few also suggest the central bank should replace its foreign money chest coverage completely. “For increased cost efficiency, they could allow private third-party non-banking organisations to handle currency chests,” said Rituraj Sinha, group MD of personal safety service SIS India.

The RBI is in the process of introducing varnished banknotes in the denomination of Rs 100 on a trial basis in order to extend the life of the banknotes.