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India issues redemption guidelines

If you’ve ever wondered about how to redeem worn-out coins or bank notes, don’t feel you are alone. It has been so difficult to redeem damaged and heavily circulated currency in India that their central bank has recently published guidelines meant for banks as well as consumers to follow.


A recently released Reserve Bank of India master circular presented guidelines to banks as well as a warning against refusing to accept legal tender currency. Among other things, the circular demands banks post a message that the banks will accept coins and bank notes that need to be recycled.

According to the circular, “All designated bank branches are required to display at their branch premises, at a prominent place, a board indicating the availability of note exchange facility with the legend, ‘Mutilated Notes Are Accepted And Exchanged Here.’ Banks should ensure that all their designated branches undertake note exchange business.”

The central bank didn’t stop there. All central bank branch offices were directed to accept coins of all denominations for either exchange or for deposit. Lower denomination coins may be accepted by weight rather than by count, while other coins can be accepted in what is described as “polythene sachets” of 100 coins each or more. This, according to RBI information, is for the convenience of the cashiers as well as the bank client.

According to the new bank guidelines, low denomination coins now being withdrawn from circulation should be packed separately and by metal composition. This includes aluminum composition 5-, 10- and 20-paise coins; aluminum-bronze and stainless steel 10 paise; and copper-nickel 25 and 50 paise and 1, 2 and 5 rupees. “In case of large variation of weight, counting machines may be used.”

Guidelines for redeeming bank notes fall into categories of soiled and cut; mutilated; or “extremely brittle, burnt, charred, or stuck up” notes.

Soiled and cut notes can’t be cut into more than two pieces with “no essential feature of the note” missing. “These unfit notes shall, in no case, be issued to the public as reissuable notes but shall be deposited in currency chests for onward transmission to RBI offices as chest remittances.”

According to the RBI, “A mutilated note is a note of which a portion is missing or which is composed of pieces. Mutilated notes may be presented either at Issue Offices of [the] RBI or designated bank branches of commercial banks.”

The guidelines continue, “Notes which have turned extremely brittle or badly burnt, charred, or inseparably stuck up together and therefore cannot withstand normal handling shall not be accepted by the branches for exchange. Instead, the holders may be advised to tender these notes to the concerned Issue Offices where they will be adjudicated under a special procedure.”

The RBI explained why all these guidelines are now necessary. According to the Reserve Bank of India Act 1934 (Section 28 with Section 58), “No person is entitled as a right to recover from the Government of India or RBI the value of any lost, stolen, mutilated, or imperfect currency note of the GOI or bank note.”

The same law allows refunds as “a matter of grace.” Under RBI (Note Refund) Rules, 1975 (as amended up to 1980) for the benefit and convenience of public, all currency chest branches have been delegated powers for exchange of torn/mutilated/defective notes.

Redemption of well-worn or mutilated coins and bank notes has been an ongoing concern in India, with many banks refusing to accept such currency.

This article was originally printed in World Coin News. >> Subscribe today.

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