03 May 2016 Generally regional office (RO) of bank decides the cash retention limit of all the branches under its control... it is desided on the basis of deposit size of branch... however RO may take into account other considerations

BASHISHT KUMAR

BASHISHT KUMAR (Querist)
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03 May 2016 Sir please tell me what is the way to determine cash retention limit ( by notificati)on or letter or documents

BASHISHT KUMAR

BASHISHT KUMAR (Querist)
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03 May 2016 by which way RO NOTIFY TO BRANCH

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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20 July 2025 In the case of cash retention limit in banks, there is no uniform statutory rule or published notification under the Banking Regulation Act that prescribes a specific amount. Instead, it is governed by internal policies of each bank as approved by their respective Regional Offices (RO) or Head Office (HO).

✅ Key Points to Understand:
Cash Retention Limit (CRL) refers to the maximum cash balance a bank branch is allowed to retain overnight.
This limit is set by the bank’s Regional Office (RO) or Circle Office, depending on the bank's hierarchy.
It varies from branch to branch and depends on factors like:
Branch category (A/B/C/D) – based on business volume
Average cash withdrawal/deposit trends
Risk profile & location (e.g., rural/urban)
Security arrangements (e.g., presence of a strong room)
📃 How RO Notifies Branches:
The Regional or Circle Office issues a formal internal letter/memo to each branch stating their approved Cash Retention Limit.
This may be:
Part of the Branch Operations Manual
A circular or office order
Mentioned in quarterly inspection or audit reports
Available in core banking software dashboards or compliance registers
🔍 As a Concurrent Auditor, You Should:
Ask the Branch Manager for the official document or circular showing their approved retention limit.
Check whether the actual cash retained at the end of the day is within the limit.
If it exceeds:
Verify whether there's authorization or explanation (e.g., festival rush, ATM replenishment pending).
Report in your audit findings if it's a regular occurrence without justification.
🏛️ RBI Role:
RBI sets broader cash handling norms but does not specify per-branch CRL.
Banks are expected to operate within the prudential norms under RBI's Master Circular on Cash Management.
✍️ Summary:
Question Answer
Is there a rule under the Banking Regulation Act for CRL? No, it is internally decided by each bank’s Regional/Head Office.
Who fixes the limit? Regional/Circle Office based on deposit size, risk, and operational needs.
How is it communicated? Through internal memo, circular, or branch operation manual.
What should auditor do? Verify limit from branch and check for compliance. Flag any excesses.

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