Don't trash bad notes, exchange

Many a time you may come in possession of bad quality notes and sometimes these currency get torn into pieces of different size, rather unintentionally.

Do you discard the bad notes and even throw away the cut notes or pieces ofthem? The Reserve Bank of India (RBI) desires the public to possess only good quality currency notes and channelise the bad quality notes back to the RBI through banks.

As a layman you should be aware of your entitlements to exchange cut/ mutilated/ soiled notes and receive the value specified. A brief given below will help in understanding your rights to exchange bad/ poor quality notes through the banking system.

A currency note which has become dirty due to usage or a ‘two-piece note’ where two pieces of the same note are pasted together to form the entire note is a “soiled note”. A note of which, a portion is missing or which is composed of more than two pieces is classified as a “cut/ mutilated note.”

Any currency note cut into two pieces (irrespective of the location of the cut) and pasted together is a soiled note and you can receive full value for this from banks. However, the amount receivable on mutilated notes depends upon the denomination of the notes and the largest undivided portion available of it.

For notes from denomination of Rs 1 to Rs 20, full value is receivable if the single largest undivided piece of the note presented is more than 50 per cent of the area, rounded off to the next complete square centimeter (measured in a standard grid) and if it is below or even up to 50 per cent, no value is receivable.

For example, a Rs 20 denomination note has an area of 93 sq cm. If the area available in the undivided portion is a minimum of 47 sq cm, full value is receivable, but if area of the note is less than 47 sq cm, no value is receivable.

For higher denominations (i.e. Rs 50 to Rs 1,000), if the undivided area is more than 65 per cent, you get a full value; 40 per cent to less than 65 per cent, half value; and less than 40 per cent, no value is receivable.

Except for the largest undivided piece of the note, presentation/ submission of the
remaining pieces is not mandatory and even if the remaining pieces are pasted together, the value receivable does not change.

The facility of exchange of soiled or cut or mutilated notes is made available at all bank branches – including those of cooperative banks and regional rural banks (RRBs). All bank branches display a board that reads, “Soiled/ mutilated notes are accepted and exchanged here.”

If a bank branch is not able to immediately adjudicate the cut/ mutilated notes, it an accept and send such notes to the linked currency chest and ensure that the tenderer receives the exchange value within a reasonable time, say a fortnight.

This facility is to be provided to all members of public without discrimination on all working days. Today, banks are required to exchange the soiled/ mutilated notes as one of their regulatory requirements.

These exchanged notes will be remitted to RBI through the currency chests/ link branches and it will reimburse the amount to the respective banks.

What is it in for banks?

The RBI has built-up a reward and punishment system to ensure that banks provide the services to the general public.

An incentive of Rs 2 per packet (100 pieces) for exchange of soiled notes up to Rs 50 and for adjudication of mutilated notes at Rs 2 per piece is provided by RBI to the banks.

Refusal by any bank branch to exchange soiled notes or refusal by any currency chest branch to adjudicate mutilated notes tendered by any member of public can attract a penalty of Rs 10,000. The penalty can be Rs 5 lakh in case there are more than five instances involving deficiency in service by the branch, and such penalty will be placed in public domain.

Next time you come across any bad, soiled or cut note, remember it is your entitlement to get the note exchanged through banking channel within the well-defined system put in place by the RBI.

(The writer is a retired bank executive. He is currently a Faculty of Banking at ICICI Manipal Academy, Bengaluru)

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