“All branches of banks in all parts of the country are mandated to provide the following customer services, more actively and vigorously to the members of the public so that there is no need for them to approach RBI Regional Offices for this purpose: (i) Issuing fresh/good quality notes and coins of all denominations, (ii) Exchanging soiled/mutilated / defective notes, and…..,” said the RBI in a Master Direction dated April 3, 2023, and updated on May 15, 2023.
Here’s how to exchange soiled/mutilated currency notes at bank branches:
According to Prashant Joshi, Managing Director & Head- Consumer Banking Group, DBS Bank India, an individual “does not need to open an account to facilitate the exchange of the soiled/mutilated, etc notes; they can visit any of their nearest bank branches and utilise this service on all working days.”
“A currency note is called a mutilated note when a portion of it is either missing or the note is composed of more than two pieces,” said Sivaraman K, General Manager & Head – Banking Operations Group, South Indian Bank.
However, the value of such soiled/mutilated notes would be determined as per rules specified by the RBI and a bank’s own internal policy too in certain cases like large value of exchange, etc. According to Joshi, “The value of the settlement is contingent upon the note’s quality and may result in full, half, or no value based on its condition.”
The RBI Note Refund Rules also specify the following:
- “For torn or soiled notes with a denomination of less than Rs 50, if the area of the single largest undivided piece of the note is more than 50 per cent of the area of the respective denomination (rounded off to the next complete square centimeter) the full value may be payable. In other cases, the claim shall be rejected. This is all subject to the minimum area as defined in the RBI rules,” according to Joshi.
- For torn or soiled notes with a denomination Rs 50 and above, “if the area of the single largest undivided piece is more than 80 per cent then full value will be given. If the area of the single largest undivided piece is more than or equal to 40 per cent and less than or equal to 80 per cent, then half value will be payable. If the area of the single largest undivided piece is less than 40 per cent, then banks will reject exchanging the said note(s),” said Sivaraman K.
- For mutilated notes the rules are slightly different. “If the claim consists of a mutilated note in two pieces, each having an area equal to or greater than 40 per cent of the total area of the note, the claim may be refunded for the full value of the note. For mutilated and imperfect notes, the branch issues a receipt for adjudication,” says Joshi.
“Notes which have turned extremely brittle or are badly burnt, charred or inseparably stuck up together and, therefore, cannot withstand normal handling, shall not be accepted by the bank branches for exchange. Instead, the holders shall be advised to tender these notes to the Issue Office of Reserve Bank of India concerned where they will be adjudicated under a Special Procedure,” said the RBI in a circular dated April 3, 2023, and updated on May 15, 2023.
Source: DBS Bank India
What is the maximum exchange limit for soiled/mutilated notes?
“Once the appropriate value is determined for the soiled/mutilated, etc currency notes, banks will disburse fresh cash in lieu of the said soiled/mutilated currency notes. Customers are allowed to exchange up to 20 pieces of soiled notes with a maximum value of Rs 5,000 per day and receive fresh currency notes without any restrictions,” said Joshi.
“However, if the quantity exceeds this limit, banks will accept the soiled notes and issue a receipt for the exchanged notes’ value, which will be credited to the customer’s bank account. Additionally, if the total value of the soiled notes being tendered exceeds Rs 50,000, banks are required to follow standard precautions, which include obtaining the tenderer’s PAN and other details. It is also important to note that such bulk exchanges (exceeding 20 notes or currency value over Rs 5,000) attract service charges depending upon respective banks,” said Joshi.
“In case of high-value transactions identified on a case-by-case basis based on the bank’s internal management policies, the soiled notes would be exchanged only when the customer provides their PAN and any one of the officially valid documents. Furthermore, on a case-to-case basis, banks may also ask the customer exchanging the said soiled notes to furnish details of the source of the said soiled notes that he/she wants to exchange for fresh notes,” said Sivaraman. Some examples of officially valid documents include an Aadhaar card, driving license, etc.