Moneylife Impact: RBI Asks Banks To Exchange Soiled Notes across Branches
The Reserve Bank of India (RBI) has asked all banks to provide facility to exchange soiled notes at all of their branches to all customers irrespective of whether she is an account holder or not. Under RBI rules, banks do not exchange soiled notes unless there is a specific notification from the RBI about their exchange. It may be recalled that the government issues a series of new notes of different denominations - Rs2,000, Rs500, Rs200, Rs100, Rs50, Rs20 and Rs10 as part of the demonetisation exercise. 
 
The life of a note is around one year, after which, if soiled, banks are supposed to exchange the notes when presented to them. However, in the absence of any notification by the RBI, banks refused to exchange the newly introduced currency, even though it was eligible for exchange as per soiled note guidelines. The reason: there was no official circular to this effect. 
 
RBI has finally issued a gazette notification, which mentions currency notes in the denomination of Rs200 and Rs2,000.
 
 
Similarly, RBI has asked banks to provide the facility to exchange mutilated notes at designated bank branches, including cooperative and regional rural banks. In October 2017, Moneylife had taken up the issue of soiled notes with the then RBI governor Dr Urjit Patel, who had responded to our call and given us an opportunity to present the data to senior officials. RBI had assured us of a quick action at that time. However, it took its own time before coming out with note refund rules.
 
 
In the RBI (Note Refund) Rules), the central bank says, "Only those notes which are mutilated should be examined and adjudicated by the prescribed officer. Soiled notes, which include two piece notes having middle or near middle cut either horizontally or vertically, should be freely accepted and exchanged at all branches including currency chest branch."
 
"It needs no emphasis that the object of simplification of RBI Note Refund Rules and its extension is to help members of the public exchange the cut/mutilated notes in their possession without difficulty. The designated bank branches should play an active role and ensure that the facility is operated for the benefit of the members of public at large and is not pre-empted by a group of persons," the central bank says.
 
According to official estimates, nearly 25 billion pieces of soiled notes are in circulation (Rs12 billion reintroduced during demonetisation plus fresh soiled notes generated since then) and the worst denomination is the Rs10 note which is widely used. The life of a currency note is 3.5 years and the RBI has a clear 'Clean note policy' to deal with withdrawal and destruction of notes, which was introduced after severe outrage over tattered currency in the 1990s.
 
Many people were complaining about inability to exchange soiled notes, including new notes of Rs2,000 and Rs500 denomination from banks in the absence of explicit guidelines or rules from RBI. The central bank had released Rs2,000 currency note during the demonetisation period, while it issued new Rs200 note in September last year. However since there was no provision to exchange new currency notes, people were facing issues.
 
In its rules, RBI has also clarified on the definition of soiled notes. It says, "Soiled note means a note, which has become dirty due to usage and also includes a two piece note pasted together wherein both the pieces presented belong to the same note, and form the entire note."
 
However, notes which have turned extremely brittle or are badly burnt, charred, inseparably stuck together and, therefore cannot withstand further handling or which may lose their original identity with the passage of time will not be accepted by the branches for exchange. Such notes will have to be exchanged from the issue department of RBI's currency chest under a special procedure.
 
According to RBI, the value of the imperfect note may be paid for full value or half value depending upon the condition of the currency. Banks are directed to accept for exchanges notes in the denomination of Rs1, 2, 5, 10, 20, 50, 100, 500, 1,000 (not in circulation at present), 2,000 and such other denominations of notes that may be issued in future.
 
RBI has divided the currency note denomination in two groups for determining the exchange value based on condition of the note(s). For notes of Re1 to Rs20, if the largest undivided piece is more than 50% of the note area, then full value should be paid to the customer. If the largest undivided piece is less than or equal to 50% of the note area, then the claim would be rejected and the customer will not receive any value.
 
 
For currency notes with denomination of Rs50 and above, full value would be paid only of the area of single largest undivided piece of the note is more than 80%. If this area is less than 80% but more than 40% then the customer can receive 50% value of the note. If the area of the single largest undivided piece of the note is less than 40%, no value would be paid, and the claim will be rejected.
 
In case there are two pieces of the single note, with each having an area equal to or larger than 40%, then the bank is required to pay full value of the note to the customer.
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    Ramesh Poapt

    2 years ago

    Good one!!

    Anand Vaidya

    2 years ago

    The PDF does not address the main grouse of citizens: Banks refuse to accept soiled notes for exchange. The notification does not make it explicit that Banks MUST accept soiled notes.

    Many banks in my city ask us to take the notes to SBI or RBI and SBI obviously asks us to go to where we hold accound. Here's the vicious circle.

    Urjit Patel's resignation signals dangerous trend: AIBEA
    Although the All India Bank Employees' Association (AIBEA) had earlier demanded RBI Governor Urjit Patel's resignation, his calling it quits on Monday has left the banking body shocked and disturbed and it has termed it a "dangerous trend".
     
    "The resignation of RBI Governor Urjit Patel is quite shocking and disturbing. The reasons for his resignation are obvious and signals a dangerous trend that institutions like RBI are no longer independent," AIBEA General Secretary C.H. Venkatachalam said.
     
    Venkatachalam said at a time when there is a need for a more stronger and independent RBI, this vital institution is being intimidated by the central government.
     
    The government is bent on weakening the RBI and making it pliable to meet its own political needs, he said.
     
    When cited AIBEA's earlier demand that Patel should quit, Venkatachalam told IANS: "We had demanded his resignation over inaction on Nirav Modi issue. This is different. He is being eased out. It is an attempt to weaken the RBI."
     
    In February, Venkatachalam demanded Patel's resignation owning up moral responsibility for the massive $1.8 billion Punjab National Bank scam/fraud allegedly committed by diamond retailer.
     
    "The continued silence of the RBI Governor with regard to the scam/fraud in PNB is surprising and astounding. It indicates the deep involvement and failure of RBI in non-monitoring the Nostro account of PNB," Venkatachalam had told IANS then.
     
    In April, the AIBEA had aggain demanded Patel's resignation, charging that the central bank was grossly negligent on several issues, including the cashless ATMs across the country.
     
    In a statement at the time, Venkatachalam had said: "RBI has increasingly become irrelevant because they are becoming an appendage of the government, not enforcing their independent powers.
     
    "In issue after issue, RBI is found wanting. It is high time that the present RBI Governor owns up and resigns or he should be removed. RBI is grossly negligent."
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • Like this story? Get our top stories by email.

    User 

    COMMENTS

    Dr.Dhananjaya Bhupathi

    2 years ago

    1. Why CHV is questioning Shri Urjit Patel's resignation, when he [CHV] valiantly demanded resignation on 2 occasions? CHV Sir, do you have any mind think?
    2. Why CHV should not resign from AIBEA, when lacs of Bankmen demand your resignation, comrade? Why do you continue to lead, shamelessly, even after retiring 1 decade ago?
    3. How much further favours you expect from XI BPS to benefit your only daughter/son-in-law?
    4. Whether AIBEA is a dead force to shunt out?
    5. It is left to the wisdom of UFBU affiliates whether to go on INDEFINITE STRIKE FROM 26.12.2018 against banks' mergers.

    How Loans to Promoters and Poor Disclosure Was Used To Boost Net Worth, Loan Book and Valuation of DHFL
    DHFL's Promoters have a structured a deal that has allowed them to borrow from two mutual funds and indirectly inject the money into DHFL which boosted its net worth. A higher net worth of DHFL, in turn, has increased its borrowing and lending capacity and also boosted its valuation. In the process, the publicly held DHFL has underwritten a put option for the promoters the details of which...
    Premium Content
    Monthly Digital Access

    Subscribe

    Already A Subscriber?
    Login
    Yearly Digital Access

    Subscribe

    Moneylife Magazine Subscriber or MAS member?
    Login

    Yearly Subscriber Login

    Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation
  • We are listening!

    Solve the equation and enter in the Captcha field.
      Loading...
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email
    Close

    To continue


    Please
    Sign Up or Sign In
    with

    Email

    BUY NOW

    online financial advisory
    Pathbreakers
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 3 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone