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      Cash is in money held in the form of currency notes or in coins or held in accounts with other banks that are available on demand or after giving notice.


      Banks hold cash in two forms:

  Cash with banks and

  Cash in hand

      The intent is to keep as little cash as possible as cash does not earn any interest while the bank has to pay interest to its depositors on amounts they have deposited in the bank


      Cash with banks

  Banks keep cash or balances with:

   The Reserve Bank of India and

   Other commercial banks.


   Cash with the Reserve Bank of India

    Commercial Banks keep money with the Reserve Bank for two purposes:

   To meet Statutory requirements. Banks are under the Banking Regulation Act required to keep a certain percentage of their net demand and time liabilities in cash with the Reserve Bank of India. At present the percentage that they are required to keep is 5.00 %. The RBI does not pay any interest on 3% of the 5.00% kept. On the remainder interest is paid at the bank rate.
   To make payments to and receive amounts from other commercial banks. This may be with regard to investment transactions or clearing or other interbank transaction including borrowing from or lending to commercial banks.  


  Cash with other banks

   Accounts are kept with other banks for commercial needs. Banks in India often maintain accounts with banks in other countries for trade transactions.

   Accounts may be maintained with other banks in India for convenience especially if the bank does not have a branch in a particular location or alternatively if services of another bank is availed of for cash management or clearing or other services.


      Cash in hand

   Cash is kept by banks to meet day to day needs.

   The amount kept by a bank will vary from bank to bank and from branch to branch as the demands of customers will vary.

   Banks will aim to keep the minimum they require to meet needs as cash is unproductive and earns no interest.

   The cash held in a bank branch may be divided into cash:

    In the vault and

    With tellers




   Cash in the vault

   The amount kept in the vault is the total the branch estimates is required to meet its needs. It is usually for this amount or slightly more that the bank will take insurance cover.
   This money is kept in a safe inside a strong room or a vault and is under the custody of a cashier.


   Cash with tellers

  Normally at the start of each day, the cashier hands over to tellers cash for the day. The amount handed out to tellers will depend on the bank and the usual volume of transactions the bank has.
  In addition each teller often has a certain amount in his box as bait money. This consists of assorted notes. The numbers of these notes are marked and the intent is to hand these over if a robbery takes place. The fact that the numbers of these notes are  recorded can help trace the notes to those who robbed the bank.
   During the day if a teller needs more money he would either borrow the amount he requires from another teller or from the cashier.
   At the end of the day the teller should account for the cash he has in his box.
   It is not unusual, at the end of the day for a teller to have a difference. A person may have been paid more or less money or the teller may have received more or less money. This is known as “unders or overs”. In some banks tellers are expected to make good any “unders”. In others no action is taken apart from a record of unders and overs. At the end of a month, the net amount is either added or deducted from cash and taken to either income or expenses as appropriate. 
   The practice of what should be done at the end of a day varies from bank to bank. In some banks the money is returned to the cashier whereas in others the box is not emptied every day but is replenished after taking into account the net inflow/ outflow.
   At the end of the day cashiers perform a bundle check to satisfy themselves that all money held can be accounted for.


  Excess Money

   If the branch has more money than it requires it would surrender the extra money that it has either to the Reserve Bank or to another bank with whom it has a relationship or to the bank’s currency chest branch.

   Large banks and those that have several branches in a city often have a currency chest. This is technically money of the Reserve Bank that the bank keeps on behalf of the Reserve Bank.




The RBI has issued instructions that notes must not be stapled. This was because earlier banks had the habit of awkwardly stapling the notes and binding bundles with multiple staples. The result was that it was very difficult to separate the notes and the multiple stapling also resulted in the notes tearing.


Mutilated/ soiled notes

      If mutilated notes are presented banks should accept them if the numbers on the note are still on it – they are not torn off.

      If the bank takes a badly mutilated note, it should be communicated to the client that if the Reserve Bank does not accept the note, his account will be debited.


Forged Notes

      If a forged note is presented, the presenter’s (tenderer’s) name and address should be noted. He should be given an acknowledgement.

      The note should be stamped “Forged note impounded” The stamp must also state the name of the bank, the branch and date.

      The note should be sent to the local police for investigation by filing a first information report (FIR). A copy of the Fir must be sent to the RBI.

      If only one or two notes are detected and the tenderer appears innocent, a police complaint need not be lodged. The notes must be impounded and sent to the RBI



      The RBI has issued instructions that banks must accept coins as it is legal tender. This notice was issued as there were several banks that refused to handle a large amount of coins deposited because of the time it would take to count it.

Dual Custody

      As a matter of control the vault must be under dual control. This means that the second key and the combination should be with another person. This ensues that if the vault is to be opened there has to be two persons present and embezzlement will therefore not happen unless there is collusion.

      The controls on cash must be very strong. Cash is fungible – changes form and once lost is difficult to trace.