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Damaged Notes: RBI Rules To Exchange And Claim Refund

In December 2018, RBI had announced the Reserve Bank of India (Note Refund) Amendment Rules, 2018.

This is an update on its earlier Reserve Bank of India (Note Refund) Rules, 2009.

These revised rules aim to simplify and liberalize the whole process of exchange, so that people can get a refund for the cut / mutilated / soiled notes without any difficulty.

The facility for exchange of damaged notes is to be provided by all banks at all their branches. In fact, they have to extend this facility of exchanging damaged notes to everyone i.e. their customers and non-customers too.

Salient aspects of these revised note refund rules — for exchanging your damaged currency and claiming refund — are discussed below.

Firstly, the damaged banknotes have been classified into four categories viz. Soiled, Mutilated, Imperfect and Mismatched Notes. Accordingly, based on the extent of damage, the refund rules have been laid down for various denominations of damaged currency notes.

1. Soiled Note
This is defined as a note which has become dirty due to daily use. Two pieces of the same note pasted together, so that it becomes one proper entire note, also comes this category. 

Banks have been advised to freely accept and exchange such "soiled notes" at all branches for the Full Value of the note.

2. Mutilated Note
This is when a portion of the bank note is missing. It also includes those that have got torn into 'more than two' pieces.

(a) Notes of less than Rs.50 denomination
Full Value will be paid if the single largest undivided piece of the "mutilated" note is more than 50% of the area of the respective denomination. But, your claim for refund will be rejected if the largest undivided piece of the damaged note is 50% or less than the area of the original note.

This, actual denomination-wise area, is specified in the Column 5 of the Table 1 below.

rbi-note-refund-rules-table-1

(b) Notes of denomination Rs.50 or more
- Zero Value : If the area of the single largest undivided piece of the mutilated note is less than 40% of the area of the respective denomination
- Half Value : If the area of the single largest undivided piece is between 40% to 80% of the original note
- Full Value : If the area of the single largest undivided piece is more than 80%.
- Full Value : If there are two pieces of the same note and each piece has an area of 40% or more.

This actual denomination-wise area is specified in the Column 5 or 6, as the case may be, of the Table 2 below.

rbi-note-refund-rules-table-2

3. Imperfect Note
Wholly or partially obliterated, shrunk, washed, altered or indecipherable banknote, which does not come under the mutilated note category, is defined as an imperfect banknote.

You will be paid Full Value / Half Value as specified in the Tables 1 and 2 above, provided
- the matter printed on the note is not totally illegible, and
- the bank is satisfied that the note is genuine, based on the readable printed matter.

4. Mismatched Note
A mutilated note formed by joining a half note of any one note to a half note of another note is classified as mismatched note. Such a note can be identified on the basis of number, signature etc. and / or after examining other security features

(a) Notes of upto Rs.20 denomination
Area of only the larger piece will be measured and smaller piece will be ignored. If the larger piece meets the minimum area required as discussed earlier for Mutilated Notes, the claim will be accordingly settled. But, if none of the two pieces meet the minimum area criteria, you won't get any refund.  

(b) Notes of denomination Rs.50 or more
The two pieces will be treated as two separate claims and will be exchanged and refunded as per the above-mentioned rules on Mutilated Notes. 

An interesting point, when it comes to the exchange of damaged notes, is that the value of refund of any note is NOT dependent on the presence or absence of its serial number (or, for that matter, any other specific feature).

Finally, it must be noted that you will NOT get any refund in exchange in the following cases:
- If it is not possible to determine whether the note is genuine
- When the note has been mutilated, made imperfect, cut, torn or altered in any manner so as to make a false claim or defraud the bank 
- When it carries any words or drawings that convey a political / religious message or furthers the interest of any person / entity
- If any information required by the Bank is not furnished within a period of 3 months
- If it has been imported into India in contravention of any law

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