Skip to main content

How much value does torn / cut note carry? What are Note Refund Rules?

Received a torn / cut note from a shopkeeper / vegetable vendor and unable to use it for further transactions? Kids tore off the note in multiple pieces? Note accidently got burnt, losing a portion of the note? Found pieces of notes from old stuff? Do such notes have any value? Where can we exchange such notes? What are Note Refund Rules (NRR)?

What are Note Refund Rules (NRR)?

In terms of Section 28 read with Section 58(2) of Reserve Bank of India (RBI) Act, 1934, a person is not entitled to recover the value of any lost, stolen, mutilated or imperfect currency note / banknote from the Government of India / RBI as a right. However, RBI may prescribe the circumstances in, and the conditions and limitations subject to which, the value of such currency notes / banknotes may be refunded as a matter of grace.

Accordingly, the Note Refund Rules have been prescribed by RBI for exchange of mutilated / defective notes. 

As per Rule 2(j) of RBI (Note Refund) Rules, 2009 [as Amended by RBI (Note Refund) Amendment Rules, 2018], the powers for exchange of mutilated / defective notes free of cost, have been delegated to all branches of banks.

What is Soiled Note?

  • Soiled note is –
    • A note which has become dirty due to normal wear and tear.
    • A two-piece note pasted together wherein both the pieces belong to the same note and form the entire note with no essential feature missing. 
  • Soiled notes can be used to pay Government dues at the bank counters or can be deposited in bank accounts. 
  • Soiled notes are paid in full.

What is Mutilated Note?

  • Mutilated note is –
    • A note wherein a portion of the note is missing 
    • A note which is composed of more than 2 pieces. 
  • The mutilated notes can be deposited with bank branches against a receipt, the value of which is credited to the bank account of the customer within 30 days.

How is the value of Mutilated Note ascertained?

For the notes of denominations of ₹1 to ₹20 – 

  • If the area of the largest piece of the note is more than 50% of the total area of the note – full value of the note is paid.
  • If the area of the largest piece of the note is equal to or less than 50% of the total area of the note – the piece does not have any value.

For the notes of denominations of ₹50 to ₹2000 – 

  • If the area of the largest piece of the note is more than 80% of the total area of the note – full value of the note is paid.
  • If the area of the largest piece of the note is 40% to 80% of the total area of the note – half value of the note is paid.
  • If the area of the largest piece of the note is less than 40% of the total area of the note – the piece does not have any value.

Denomination of notes Area (in cm sq.) Minimum area (in cm sq.) required for payment of half value Minimum area (in cm sq.) required for payment of full value
1 61.11 - 31
2 67.41 - 34
5 73.71 - 37
10 86.31 - 44
10 (New MG Series) 77.49 - 39
20 92.61 - 47
20 (New MG Series) 81.27 - 41
50 107.31 43 86
50 (New MG Series) 89.10 36 72
100 114.61 46 92
100 (New MG Series) 93.72 38 75
200 96.36 39 78
500 99.00 40 44
2000 109.56 80 88

What is Imperfect Note?

  • Imperfect note means any note, which is wholly or partially, obliterated, shrunk, washed, altered or indecipherable but does not include a mutilated note. 
  • Imperfect notes which can withstand normal handling shall be presented at any of the bank branches for exchange. 

Which notes cannot withstand normal handling?

Notes which have turned extremely brittle or are badly burnt, charred or inseparably stuck up together and, therefore, cannot withstand normal handling, are not accepted by the bank branches for exchange. Such notes can be sent to / deposited with RBI for adjudication under Special Procedure.

Which claims are rejected?

Claim on the following notes are rejected –

  1. Note on which value has already been paid.
  2. Any note with slogans and message of political / religious nature written across it ceases to be legal tender.
  3. Notes which are disfigured.
  4. Notes which are found to be deliberately cut / torn / altered / tampered with.


References

Reserve Bank of India. (2018, December 28). 'Reserve Bank of India (Note Refund) Rules, 2009 [As amended by Reserve Bank of India (Note Refund) Amendment Rules, 2018]'. Retrieved from https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=18770

Reserve Bank of India. (2022, April 01). 'Master Circular – Facility for Exchange of Notes and Coins'. Retrieved from https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=12265

Reserve Bank of India. (2022, August 29). 'The Reserve Bank of India Act, 1934'. Retrieved from https://www.rbi.org.in/Scripts/OccasionalPublications.aspx?head=Reserve%20Bank%20of%20India%20Act

Reserve Bank of India. (2025, April 01). 'Master Direction – Facility for Exchange of Notes and Coins'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12818&Mode=0#ANN1


Follow at - Telegram   Instagram   LinkedIn   Twitter

Labels:

Comments

Post a Comment

Popular Posts

Report of the Committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector

Reserve Bank of India (RBI) has released the report of the committee to develop a framework for responsible and ethical enablement of artificial intelligence (FREE-AI) in the financial sector. Committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector In the financial sector, Artificial Intelligence (AI) has the potential to unlock new forms of customer engagement, enable alternate approaches to credit assessment, risk monitoring, fraud detection, and offer new supervisory tools. At the same time, increased adoption of AI could lead to new risks like bias and lack of explainability, as well as amplifying existing challenges to data protection, cybersecurity, among others. To encourage the responsible and ethical adoption of AI in the financial sector, the committee to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the Financial Sector (Chairperson: Dr. Pushpak B...
Post a Comment
Read more

Continuous Clearing and Settlement on Realisation in Cheque Truncation System (CTS)

Reserve Bank of India (RBI) has issued direction on continuous clearing and settlement on realisation in Cheque Truncation System (CTS). What is Cheque Truncation System (CTS)? Cheque Truncation System (CTS) involves halting the physical movement of the cheque and its replacement by images of the instrument and the corresponding data contained in the MICR line.  In CTS, 3 images are taken of each cheque – front Gray Scale, front Black & White and back Black & White. MICR (Magnetic Ink Character Recognition) is a 9-digit code printed at the bottom of cheques using magnetic ink – first 3 digits indicate City Code, middle 3 digits indicate Bank Code and the last 3 digits indicate Bank Branch Code. Only CTS-2010 standards compliant instruments can be presented for clearing through CTS. The presenting banks which truncates the cheques need to preserve the physical instruments for 10 years. From when will the continuous clearing and settlement on realisation in CTS be implemented...
Post a Comment
Read more

What is KYC?

Be it opening a new bank account, applying for a new credit card, registering for new e-wallet, or any other account or facility involving financial matters, the application process is incomplete until KYC is done.  What is KYC? KYC or Know Your Customer is a process of customer identification and verification while opening an account or undertaking a financial transaction. Why is KYC process needed? To prevent money laundering To combat financing of terrorism What is verified under KYC? The banks / financial institutions collect the relevant documents from the customers to verify the following – Proof of identity Proof of address Which documents can be collected for KYC? As per RBI’s Master Direction - Know Your Customer (KYC) Direction, 2016 (Updated as on May 10, 2021), “Officially Valid Document” (OVD) means – Passport Driving licence Proof of possession of Aadhaar number Voter's Identity Card issued by the Election Commission of India Job card issued by NREGA duly signed by an...
Post a Comment
Read more

Non-Fund Based Credit Facilities

Reserve Bank of India (RBI) has issued directions on non-fund based credit facilities. To whom shall the directions be applicable? The directions shall apply to the following Regulated Entities (REs) for all their Non-Fund Based (NFB) exposures such as guarantee, letter of credit, co-acceptance etc. Commercial Banks (including Regional Rural Banks and Local Area Banks) Primary (Urban) Co-operative Banks (UCBs) / State Co-operative Banks (StCBs) / Central Co-operative Banks (CCBs) All India Financial Institutions (AIFIs) Non-Banking Financial Companies (NBFCs) including Housing Finance Companies (HFCs) in Middle Layer and above, only for the issuance of Partial Credit Enhancement. The directions shall not apply to the derivative exposures of a RE. Which NFB facilities are permitted to be issued by RE? RE shall issue a NFB facility only on behalf of a customer having funded credit facility from the RE. However, this shall not be applicable in respect of – Derivative contracts entered int...
Post a Comment
Read more

Committees to be constituted by NBFC-BL

Non-Banking Financial Companies (NBFCs) are required to constitute various committees for effective corporate governance. This article lists out some of the important committees to be constituted by the Base Layer NBFCs (NBFC-BL). Board of Directors Applicability Companies Act, 2013 Section 149(1) – Every company shall have a Board of Directors. Composition of the Board Companies Act, 2013 Section 149(1) – The Board of Directors shall consist of individuals as directors – Public company – minimum 3 directors Private company – minimum 2 directors One Person Company – minimum 1 director  Maximum 15 directors (more than 15 directors may be appointed after passing a special resolution) Section 149(4) – Every listed public company shall have at least 1/3rd of the total number of directors as independent directors. Companies (Appointment and Qualifications of Directors) Rules, 2014 Rule 3 – The following companies shall appoint at least 1 woman director – Every listed company Every other...
Post a Comment
Read more