Banks Advised To Step Up Allocation Of Cash For Rural Areas

The Reserve Bank of India on Tuesday advised banks to step up issuance of fresh bank notes to their rural branches, in a move aimed at improving supply of new bills in the rural economy.

The central bank said some steps have already been initiated after observing that banknotes being supplied to the rural areas "are not commensurate with the requirements of the rural population".

"Banks should advise their currency chests to step up issuance of fresh notes to rural branches of RRBs (Regional Rural Banks), DCCBs (District Central Co-operative Banks) and commercial banks, White Label ATMs in rural areas and post offices in rural areas on priority basis which are considered main rural channels of distribution," the RBI said in a circular dated January 3, 2017.  

The RBI advised the banks maintaining currency chests to ensure that at least 40 per cent banknotes are supplied to the rural areas and to mitigate the issue in a more enduring manner.

Chests should issue bank notes in denominations of Rs 500 and below, the RBI notification said.

The directive came just a couple of days after Prime Minister Narendra Modi in his address to the nation on the eve of new year exhorted banks to make efforts to restore normalcy as fast as possible and should focus on rural areas.

The government in a surprise move on November 8 last year announced withdrawal of high value notes, stepping up its fight against black money.

The 50-day exercise ended on December 30, 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.