RBI admits to cash crunch in rural areas

Admitting to the cash crunch prevailing in rural areas, the RBI on Tuesday asked commercial banks to send at least 40 per cent of the currency meant for circulation to their rural branches.

"The bank notes, being supplied to rural areas, at present, are not commensurate with the requirements of the rural population," the Reserve Bank of India (RBI) said in a notification.

With a view to ensure that at least 40 per cent bank notes were supplied to rural areas, the banks were advised to increase the issue of currency towards the main channels of distribution in these areas.

"Banks should advise their currency chests to step up issuance of fresh notes to rural branches of Regional Rural Banks (RRBs), District Central Cooperative Banks (DCCBs) and commercial banks, white label ATMs and post offices on priority basis which are considered main rural channels of distribution," it said.

RBI asked the banks to issue notes in denominations of Rs 500 and below in rural areas with liberal issuance of existing stock of notes below Rs 100.

It also asked the bank chests to obtain supply of coins on priority basis and if required even get it issued from the central bank.

As the rural requirements could vary depending on variations in the rural and urban mix of each district, a certain percentage of allocation has been assigned to each district by RBI to facilitate a need based approach.

"The indicated proportion may be maintained on weekly average basis at each chest level as it may be difficult to stick to the proportion on daily basis," RBI said.

The government demonetised the Rs 500 and Rs 1,000 notes on November 8 with a view to battle corruption, black money and terror funding. The move triggered an unprecedented cash crunch across the country.