Thu 23rd of November 2017
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What is it?
Currency chests are branches of selected banks authorised by the RBI to stock rupee notes and coins. The responsibility for managing the currency in circulation is vested in the RBI. The central bank advises the Centre on the number of notes to be printed, the currency denominations, security features and so on. The number of notes that need to be printed is determined using a statistical model that takes the pace of economic growth, rate of inflation and the replacement rate of soiled notes. The Government has, however, reserved the right to determine the amount of coins that have to be minted.
The RBI offices in various cities receive the notes from note presses and coins from the mints. These are sent to the currency chests and small coin depots from where they are distributed to bank branches. The RBI has set up over 4,075 currency chests all over the country. Besides these, there are around 3,746 bank branches that act as small coin depots to stock small coins.
Why is it important?
Against the back-ground of the recent events in demonetising ₹1,000 and ₹500 notes, the question that arises is whether the RBI has adequate infrastructure for distributing the notes and if it is being done equitably.
Of the 4,075 currency chests in the country, 2,722 or 67 per cent are held in branches of the State Bank of India and its associate banks. Other Nationalised banks hold 1,173 chests, taking the share of the PSU banks to 95 per cent. Private sector banks (160), Co-operative banks (3) and foreign banks (4), regional rural banks (5) do not have a large role to play in stocking currency on behalf of RBI.
This might be alright in normal times as the currency chests have to be fair in supplying cash to all banks in the vicinity. But in crunch situations, such as the recent one, there are likely to be complaints from non-PSU banks about currency not being distributed equitably. The urban co-operative banks have recently been alleging that they are being allocated paltry sums from currency chests to cater to their clients.
The regional distribution of these chests also appears questionable as those living in rural areas too are complaining about non-availability of cash. With a number of small and payment banks on the anvil, ensuring that there are adequate number of currency chests in all parts of the country is an imperative.
Prelims Question of the Day
With reference to 'Natural Rate of Unemployment', consider the following statements.
1. It is the level of unemployment in an economy that is just consistent with a stable rate of Inflation.
2. It is the unemployment that prevails when all markets in the economy are in equilibrium.
(a)1 and 2
(d)None of the above
Mains Question of the Day
1.GS-No party in power can afford to ignore Directive Principles of State Policy. Comment.(200 Words)
2.Political Science - Explain the role of non state actors, like IMF, World Bank, European Union and MNCs, in modulating and transforming the broad dynamics of international relations. (250 Words).
3.SOCIOLOGY - What is the impact of Globalization on the structure and mobilization of the working class in India? (250 Words).