RBI/2004/189
D.O.DCM
(NE) No. 497 /08.01.06/2003-04
May
08, 2004
Shri / Mr.
Chairman
/ Managing Director / Chief Executive Officers of all scheduled banks
Dear
Shri / Mr.
Committee
on Procedures and Performance Audit on Public Services (CPPAPS)
You
may recall that the Governor, Dr. Reddy, in the mid-term review of the Monetary
and Credit Policy for the year, 2003-04, had indicated setting up of a Committee
on Procedures and Performance Audit on Public Services. The Committee under the
chairmanship of Shri S.S. Tarapore has since submitted its Report dealing with
Currency Management: Services Relating to Individuals (Non-Business). We enclose
a summary of the recommendations made by the Committee as Annexure
I together with the preliminary responses of the RBI on these recommendations
as well as action taken by the Bank in this regard at Annexure II.
2. I
also invite a reference to our letters DBOD.Nos.Leg.BC.60
& 70/09.07.005/2003-04
dated December 27, 2003, and February 17, 2004, regarding setting up of the Ad-hoc
Committee on Procedures and Performance Audit on Customer Services in your bank.
| Sl.
No. | Recommendations
of the Committee | Action
to be taken / proposed to be taken |
|
1. |
Recommendation
No 1. The Committee takes
note with satisfaction that, in recent years, with the help of concerted efforts
by RBI and government, the chronic shortages of notes and coins have been largely
alleviated and to that extent the severe hardships faced by the Common Person
have been eased. | The
good work will be continued and efforts to further improve the supply of notes
and coins will be taken so as to ease the further hardships faced by the Common
Person. Banks on
their part should also ensure that the supply of notes and coins available with
them in currency chests especially fresh notes, are distributed liberally to the
public. Ad-hoc Committee
in each bank may please review and ensure this is being done. |
| 2. |
Recommendation
No 2. The Committee strongly
recommends that the transparency introduced in the RBI Annual Report for 2001-02
on currency management should be replicated in the Annual Report for 2003-04 as
it is important to reveal the indent and supply as also separate information on
notes and coins where there is a parallel circulation. |
Accepted and
will be implemented. |
|
3. | Recommendation
No 3. The Committee commends
the measures relating to the Clean Note Policy and the Currency Verification and
Processing Systems and these measures provide succour to the Common Person
seeking facilities at RBI/banks. |
Noted. The Clean
Note Policy will continue to be pursued and use of Currency Verification and Processing
Systems will be enhanced till complete mechanization of processing / sorting /
verification. Banks
on their part should also implement the Clean Note Policy more vigorously by avoiding
stapling of notes, proper sorting of notes at branches and chests, putting only
reissuable quality notes into circulation and providing liberal exchange facilities
to public for exchange of soiled and defective notes. Banks should also provide
currency sorting machines at currency chests as already advised by RBI. Ad-hoc
Committee in each bank may please ensure implementation. |
| 4.
| Recommendation
No 4. The Committee observes,
with some element of regret, that for certain operations the woes of the Common
Person far from being alleviated are probably accentuated in the recent period.
| Noted.
Ad-hoc Committee in each bank should examine the reasons for accentuation of the
woes of the Common Person and review their procedures and practices for
customer services to bring about improvements to ensure qualitative and timely
service to the customers. RBI will also adopt similar approach. |
| 5. |
Recommendation
No 5. The Committee has
observed that there are already segments of shortages in certain denominations
and therefore, recommends that concerted efforts should be made to eliminate,
or at least minimise, the shortages in the incipient stages. |
Accepted. RBI
will try to ensure that they are liberal in the distribution of notes and coins
so as to ward off any impression of shortages. Banks
may also take similar suitable steps at their public counters. Ad-hoc Committee
in each bank to monitor the same. |
|
6. |
Recommendation
No 6. The Committee recommends
that the government and RBI should work towards an early introduction of the Rs.10
coin. | Accepted.
RBI is seized of the
matter and supported by the recommendations of the Committee, coinisation will
be accelerated. Subject to final decision of the GoI, RBI will be in a position
to introduce Rs 10 coin during 2005. |
|
7. |
Recommendation
No 7. The Committee would
like to stress that long periods of parallel supply of notes and coins of the
same denomination is not sustainable. The Committee, therefore, recommends a strong
and unequivocal policy to totally phase out the Rs.5 note. |
Accepted and
will be kept in view for implementation on an urgent basis, with support of the
Government of India. |
|
8. |
Recommendation
No 8. The Committee recommends
that where RBI instructions are violated strong adverse action should be taken
or if the RBI has reason to believe that the banks’ non-implementation is justified
the RBI should withdraw its instructions. The Committee stresses that it is not
the severity of the penalty that is relevant but the putting in the public domain
the imposition of the penalty. The Committee strongly recommends that the RBI
should review its instructions and where the instructions are retained violation
should invite adverse action and such action should be put in public domain. The
Committee recommends that the Currency Chest Agreement (both existing and new)
should be revised so that there is a provision for a monetary penalty for non-compliance
with RBI instructions | Accepted.
With a view to implementing
the suggestion, the RBI will review the existing measures for imposition of penalty
on erring banks and currency chests. The recommendation of the Committee relating
to review of currency chest agreements will be implemented in consultation with
the Bank’s DBOD and the Legal Department. |
| 9. |
Recommendation
No 9. The Committee recommends
that in the area of notes and coins there must be clear cut Master Circulars written
in intelligible language and there should be a 12 months sunset clause on all
circular instructions | Accepted.
The master circular will be issued shortly. |
|
10. |
Recommendation
No 10. The Committee
is of the view that the DCM – Regional Offices relationship should be reviewed
and the system of internal instructions should be revamped. The Committee recommends
that the DCM should not try to micro manage the Regional Offices particularly
if the Regional Directors are accountable for the operations of their offices. |
Will be reviewed
in two months. |
| 11. |
Recommendation
No 12. The Committee
is of the view that resorting to strong-arm tactics when dealing with a crowd
of say 30 persons, at opening time, is reprehensible. The Committee recommends
that a Systems Study of the Mumbai Regional Office, Banking Hall, arrangements
should be commissioned to an outside specialised agency which would surely be
able to resolve the bottlenecks to smooth flow of transactions. |
Accepted. A
Systems Study, as suggested by the Committee, will be conducted. |
| 12 |
Recommendation
No 13. The Committee
recommends that the problem of Money Changers needs to be studied in depth
and the RBI should consider suitable measures to separate location/time for services
to Money Changers and other individuals |
A Task Force
will be set up to study the problem of Money Changers and to explore the possibility
of providing separate locations/time for services to Money Changers and other
members of the public. |
|
13 |
Recommendation
No 14. The endeavour
should be to meet the overall demand in full rather than rationing which results
in the kind of problems the Mumbai Regional Office faces. The Committee reiterates
that shortages, if any, should be rectified in the incipient stages and these
problems should not be allowed to snowball. |
Access is constrained
at operational levels but all Regional Offices of RBI will be suitably advised
in the light of this recommendation. Ad-hoc
Committee in each bank may also review their operations and give suitable instructions
to their branches. |
| 14. |
Recommendation
No 16. The Committee
recommends that the Citizens’ Charter for Currency Exchange Facilities needs to
be revamped into a meaningful and comprehensive document written in easily understandable
language and the document should be freely available to customers visiting the
RBI Banking Halls. | Accepted. The
Citizens’ Charter for Currency Exchange facilities will be revamped and arrangements
will be made to host the updated version on the Bank’s website besides making
it freely available to the customers visiting RBI Banking Halls. Banks
may also take steps to introduce and publicise such Citizens’ Charter in respect
of currency exchange facilities at their branches. |
|
15. |
Recommendation
No 17. The Committee
recommends that access to new notes should not be a restricted privilege but also
be available to the Common Person. |
All Regional
Offices of RBI have been once again advised in the light of this recommendation.
Banks should also review
and take steps to ensure availability of new notes to the public without any discrimination.
|
| 16. |
Recommendation
No 18. One of the terms
of the delegation of authority to the bank branches is that they should prominently
exhibit a notice that soiled currency notes and notes with slight mutilation
are freely exchanged at the bank branch. Anecdotal experience available to the
Committee suggests that many bank branches do not display such notices in their
premises. The Committee has witnessed some improvement in the recent period as
the RBI has gone into a strong overdrive in the past three months. |
Ad-hoc Committee
in each bank should review and ensure that such notices are prominently displayed
at their branches. |
|
17. |
Recommendation
No 19. The Committee
recommends that the grey area relating to the specified branches where the Note
Exchange Facility is available should be unequivocally clarified by the RBI to
ensure that the Common Person is not subject to hardships. |
Accepted. Necessary
clarification will be issued and Regional Offices of RBI will be advised to prepare
a list of bank branches where services by way of adjudication of defective notes
and exchange of soiled notes are available and publicise the same. |
| 18. |
Recommendation
No 20. The Committee
strongly recommends that the RBI Note Refund Rules should be written in
easily understandable language. The Committee recommends that the Note Refund
Rules should be put on the website and the RBI should launch periodic public education
campaigns to give wide publicity to the Note Refund Rules by inserting advertisements
in regional and national dailies and also by way of printed posters to be displayed
in bank branches. | Accepted The
Reserve Bank will review the existing RBI Note Refund Rules to make its language
simpler. Adequate publicity will also be given as suggested by the Committee.
|
| 19. |
Recommendation
No 21. The Committee
strongly recommends that RBI should immediately review the existing system and
practices relating to supply of fresh note packets at the RBI counters with a
view to ensuring that all genuine needs of individuals are met without any hassle
and that fresh notes are equitably distributed throughout the country without
special favours only to known customers. The Committee recommends that the RBI
market intelligence should periodically survey the kind of premia charged by Money
Changers to the Common Person. If the supply is dispersed the chances of premia
would be less. | The
task force set up at Sl No. 12 will review the system and use of market intelligence
to keep a tab on premia being charged by Money Changers. |
| 20. |
Recommendation
No 22. Findings of the
ASCI study are very useful and the Committee recommends that DCM should revisit
the findings and take appropriate action to remove the "inconveniences"
experienced by the public in using banks for obtaining their requirement of notes
and coins including exchange of soiled and mutilated notes, and as also uncurrent
and current coins. | Accepted
and will be done. |
| 21. |
Recommendation
No 23. The Committee
recommends that the whole issue of pasting of notes should be reviewed by the
RBI. | Accepted
and will be done. |
| 22. |
Recommendation
No 24. Some of the items
provided by DCM and the Committee’s Comments/ Recommendations are set out below (i)
The facility of exchanging soiled/mutilated notes is being by and large provided
by the Public sector banks though some banks do not provide this facility. The
Committee recommends that the RBI needs to take hard decision as to what kind
of adverse action should be taken when the RBI instructions on the facility of
exchanging soiled/ mutilated notes are violated by banks. (ii)As
regards delegation of full powers under RBI Note Refund Rules to public sector
banks, the Committee has observed that the list of bank branches that have been
authorised is not readily available and even when made available the information
is incomplete and does not facilitate the Common Person as to the specific
branches of banks where these facilities are available. (iii)For
the facility of exchanging soiled/ mutilated notes, RBI has made it mandatory
for currency chest maintaining branches of public sector/ private sector/ foreign
banks to accept and exchange mutilated notes while for non-currency chest maintaining
branches of public sector banks it is a "request" to extend this
facility as per their convenience. For empowerment of the common
person the Committee recommends that a simplified dispensation for classification
of bank branches for exchange of soiled/ mutilated notes may be prescribed and
the information should be given wide publicity and be easily accessible to the
common person. (iv)As
regards acceptance of coins DCM has issued instructions to banks. But many banks
are reluctant to provide these facilities for uncurrent coins, as there are difficulties
in transmitting coins from banks to RBI/Mints. The Committee recommends that incentives
for return of coins, on the lines of incentive for distribution, are imperative
as the metal value could be more than the face value of the coins. (v)The
RBI cash counters at the Mumbai Regional Office are not customer friendly when
it comes to receiving uncurrent coins. Frequent changes in the dates on which
uncurrent coins can be tendered has greatly inconvenienced customers. The Committee
notes that at the Mumbai Regional Office uncurrent coins are now accepted on all
days. |
(i)As
already mentioned at item 8 above, RBI will review the existing measures for imposition
of penalty on erring banks. (ii)
Regional Offices of RBI will be advised to publicise list of such branches for
the benefit of the public
(iii)
Accepted. Wide publicity will be given for the list of such branches.
(iv)The
suggestion of the Committee to introduce incentives for return of coins is accepted.
A detailed scheme will be worked out in consultation with IBA in one month.
(v)Regional
offices of RBI will be advised to review existing facilities for acceptance of
coins and to further improve it and ensure that they are customer friendly. The
Central Office will facilitate the process.
|