RBI/2006-07/64 DCM(CC)No.G - 1 /03.35.01/2006-07, DT. 12/07/2006

Master Circular-Levy of Penal Interest for Delayed Reporting / Wrong Reporting / Non-Reporting of Currency Chest Transactions and Cases involving Shortages/Inclusion of Counterfeit Banknotes in Chest Balances

In supersession of all existing instructions/guidelines relating to levy of penal interest for delayed reporting/wrong reporting/non-reporting of currency chest transactions and cases of shortages/inclusion of counterfeit banknotes in the chest balances, the following fresh instructions/guidelines are issued:

Reporting of Currency Chest Transactions

a) The minimum amount of deposit into/ withdrawal from currency chests will be Rs.1,00,000 and thereafter, in multiples of Rs.50,000/-.

b) Time limit for reporting

The currency chests should invariably report all transactions to the Link Office on the same day and the Link Office in turn should report the consolidated position to the Issue Office positively on the next working day. The Sub-Treasury Offices should report all transactions direct to the Issue Office of the Reserve Bank on the same day.

c) Relaxation in respect of strike period in banks

Relaxation in the reporting period on account of general/specific strike situation will be considered. Further, as normal internal work is carried out on holidays observed for half-yearly/ annual closing by banks, these days should be treated as working days for the purpose of reckoning the permissible reporting period.

d) Levy of penal interest for delays

In the event of delay beyond three clear working days (including the date of transaction) in reporting of figures relating to a particular chest in the Link Office statement, or delay in submission of the chest slip in the case of single chest or STOs directly linked to Issue Department of the circle, penal interest at the rate indicated in paragraph 3 ibid will be levied for the period of delay excluding the date of transaction and date of receipt of figures/chest slip. Such penal interest will be levied on the amount due from the chest holding bank. (Illustrations are enclosed).

e) In case of persistence/continued delays in reporting, Regional Offices of the Bank will take up the matter with controlling offices after issuance of suitable warnings to the currency chests concerned.

f) Wrong reporting and levy of penal interest

Penal Interest will also be levied in respect of all cases of wrong reporting in the same manner till the date of receipt of corrected advice by the Bank. It is expected that Link Offices should ensure the correctness of figures reported by the respective currency chests.

g) Counterfeit banknotes in remittances received from currency chests

In case counterfeit banknotes are found in the remittances from currency chests, entire amount equal to the value of counterfeit banknotes will be debited to the bank's current account and penal interest will be levied on the amount of counterfeit banknotes from the date of previous remittance to RBI. FIRs will also be lodged with the Police in all cases of detection of counterfeit banknotes in chest remittances.

h) Reissuable banknotes in remittances received from currency chests

In case reissuable bank notes are found to be in excess of 10% in any soiled note remittance, the entire remittance will be returned to the bank/s at their cost besides debiting the amount of the remittance to the account/s of the bank/s maintained with the Reserve Bank of India.

i) Minimum penal interest to be charged

There is no stipulation regarding the minimum amount of penal interest leviable for wrong/delayed reporting. As the intention is to ensure timely and correct reporting of chest transactions, penal interest will be recovered in all applicable cases, irrespective of the amount of the transaction concerned/amount of penal interest subject to rounding off the interest amount to the nearest Rupee.

Shortages in currency chest balances due to pilferage/frauds or otherwise and inclusion of amounts of safe custody deposits in chest balances

Penal interest will be levied on the entire amount of shortage detected in the chest balances from the date following the date when the chest balance was last verified by RBI inspectors/bank's internal inspectors/ bank's/government's own officers deputed for the purpose till the date when the shortage is made good. However, in cases where it is possible to determine the exact date of occurrence of the shortage, penal interest may be charged from such date. Likewise, penal interest will be levied in respect of amounts, if any, kept in safe custody in sealed covers, trunks, etc., on behalf of Courts, government departments, etc., and included in the chest balance, from the date of inclusion of such amounts in chest balance till the date of removal thereof. The currency chest is not supposed to keep such amounts as part of chest balance.

Rate of penal interest

The penal interest shall be levied at the rate of 2 % over the prevailing Bank Rate during the period of irregularity

Levy of penal interest in respect of currency chests at treasuries

The above instructions shall be applicable to currency chests at sub-treasury offices also.

Representations

As the sole criterion for the levy of penal interest will be the number of days of delay, there should ordinarily be no occasion for banks to request for reconsideration of the Bank's decision in individual cases. However, representations, if any, on account of genuine difficulties faced by chests especially in hilly / remote areas and other chests affected by natural calamities, etc, should be made only to the concerned Regional Office of the Issue Department. As the intention behind the levy of penal interest is to inculcate discipline among banks so as to ensure prompt/ correct reporting, pleas by banks such as non-utilisation of the Bank's funds, no shortfall in the maintenance of CRR/SLR, clerical mistake, unintentional or arithmetical error, first time error, etc., will not be considered as valid grounds for waiver of penal interest.

7. Please acknowledge receipt.

Yours faithfully,

(Suchitra Maurya)
Deputy General Manager

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