Distribution of notes and coins throughout the country is done through designated bank branches, called chests. Chest is a receptacle in a commercial bank to store notes and coins on behalf of the Reserve Bank. Deposit into chest leads to credit of the commercial bank’s account and withdrawal, debit.
The major functions of the currency chests are:
To meet currency requirement of public
To withdraw unfit notes
To provide exchange facility from one denomination to another
To make payment requirement of the Government
To exchange the mutilated notes
To avoid frequent movement of cash
Apart from having its own chests at certain places, RBI also has arrangements with other banks which are entrusted with custody of the currency notes and coins for the same purpose.