[sbinews] Stanchart starts Currency Chest

  • From: sbistcbangalore@xxxxxxxx
  • To: sbinews@xxxxxxxxxxxxx
  • Date: Tue, 23 Dec 2003 07:12:43 +0500

StanChart gets to run RBI chest

MUMBAI: The Reserve Bank of India has for the first time allowed a foreign bank 
to manage its currency chest. Standard Chartered Bank — the largest and oldest 
foreign bank in the country — recently received the permission for this, 
sources told ET. 

Indications are that RBI may be open to similar proposals from other foreign 
banks as well. Neither the statute nor the norms bar a foreign bank from 
running a currency chest. However, the move is perceived significant since 
currency chests are the property of the central bank and management of these 
have till now been given only to Indian banks. 

Originally, currency chests were managed only by the State Bank of India . 
Following the nationalisation of major banks, this facility was extended to 
most public sector banks. In recent years, some of the private banks, 
particularly ICICI Bank, which has the largest ATM network in the country, were 
also given the permission. 

At present, there are 4,300 currency chests in the country managed by various 
public sector and private commercial banks. Having a currency chest enables a 
bank to fine-tune their cash management. Instead of maintaining idle cash in 
their own vaults, banks can transfer cash balances to the currency chests. Cash 
in these chests is deemed as a deposit with the central bank and therefore 
these funds qualify for cash reserve ratio, which attracts an interest return. 

On the other hand, cash maintained by a bank in its own vault qualifies for 
meeting the statutory liquidity ratio requirement (SLR). However, with most 
banks having overbought government securities — which also qualifies as SLR — 
maintaining cash in their own vaults does not provide any particular advantage. 
“Moreover, banks get new notes from RBI, which can be used to fill up their 
ATMs,” said a banker. 

Maintaining a currency chest also imposes an obligation upon the  bank to 
provide certain services to the public. These include the facility to exchange 
notes of a higher denomination into lower value notes. They are also bound to 
accept soiled and damaged notes and exchange them for new notes. “A bank is 
required to make certain investments in security and space, but the benefits of 
a currency chest far outweigh such costs,” said a banker. 

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