G-02 - 08.07.18 - dated 5^th July 2002

As you are aware, the Reserve Bank of India has, from time to time, issued a number of circulars containing instructions to banks on note exchange facility to be provided to the members of public. In order to enable the banks to have all the instructions at one place, it has been decided to consolidate the same. Accordingly, we enclose a Master Circular prepared on the subject for your information and taking appropriate action, where required.

Reserve Bank of India (Note Refund) Rules - Delegation of full powers

In terms of Section 28 read with Section 58(2) of Reserve Bank of India Act, 1934, 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. However, with a view to mitigating the hardship to the public in genuine cases, it has been provided that the RBI may, with the previous sanction of the Central Government, prescribe the circumstances in, and the conditions and limitations subject to which, the value of such currency notes or bank notes may be refunded as a matter of grace.

With a view to extending the facility for the benefit and convenience of public, all currency chest branches have been delegated powers under Reserve Bank of India (Note Refund) Rules for exchange of torn/ mutilated/ defective notes.

2.     In order to facilitate quicker exchange facilities, the following types of soiled and cut notes should be freely exchanged by all bank branches including non-chest branches. They should also be accepted over bank counters in payment of Government dues and for credit of accounts of the public maintained with banks.

SOILED NOTES

        I.        Single numbered notes - Re.1/-, Rs.2/- & Rs.5/-

Note presented should not be more than two pieces. No essential feature of the note should be missing and complete number should be available in an undivided area on one of the pieces.

II.        Double numbered notes - Rs.10/-, Rs.20/- Rs.50/-, Rs.100/-, Rs.500/- & Rs.1000/-

The note presented should not be more than two pieces. No essential feature of the note should be missing. Both the pieces should be of the same note i.e. the complete number in an undivided area on each piece should be the same.

The above types of notes will be treated as soiled notes and be packeted alongwith soiled notes. 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.

[Ref.DCM.No.G-24/08.01.01/96-97 dated 03.12.1996]

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.

3.     Every Officer-in-charge of the branch, i.e. the Branch Manager and every officer-in-charge of the Accounts or Cash Wing of the Branch shall act as 'Prescribed Officer' in each branch to adjudicate the notes received at the branch for exchange in accordance with the RBI (NR) Rules 1975 (as amended upto 1980). After adjudicating mutilated notes, the Prescribed Officer is required to record his order by subscribing his initials to the dated 'PAY'/ 'PAID'/ 'REJECT' stamp. The 'PAY' & 'REJECT' stamps should also carry the name of the bank and branch concerned. Defective notes bearing 'PAY'/'PAID' (or 'REJECT') stamp of any RBI Issue Office or any bank branch, if presented for payment again at any of the designated bank branches should be rejected under Rule 5(1) of RBI (NR) Rules and the tenderer should be advised that the value of such (defective) note/s cannot be paid since the same has already been paid as is evident from the PAY/PAID stamps affixed on it/them. All bank branches have instructions not to issue notes bearing PAY/PAID stamps to the public even through oversight.

The branches should caution their customers not to accept such notes from any bank or anybody else. [Ref. Memorandum of Procedure to be followed by Public Sector Banks and Circulars DCM.No.185/CL.1 (PSB)-86/87 dated 20.5.87 and No.52/08.07.18/ 96-97 dated 11.1.97]

4.     Any note with slogans and message of a political nature written across it ceases to be a legal tender and the claim on such a note will be rejected under Rule 5(2) of RBI (NR) Rules. Similarly notes which are disfigured may also be rejected under Rule 5(2) of RBI (NR) Rules. [Ref.DCM Cir.No.189/CL.2-86/87 dated 2.6.87]

5.     The notes, which are found to be deliberately cut or tampered with, if presented for payment of exchange value should be rejected under Rule 5(2)(ii) of the RBI (NR) Rules. Although it is not possible to precisely define deliberately cut/mutilated notes, a close look at such notes will clearly reveal any deliberate fraudulent intention, as the manner in which such notes are mutilated will follow a broad uniformity in the shape/location of missing portions of the notes, especially when the notes are tendered in large number. The details of the case such as the name of the tenderer, the number of notes tendered and their denominations should be reported thereafter to the Deputy/General Manager, Issue Department, under whose jurisdiction the branch falls. The matter should also be reported to local police in case a large number of such notes are tendered. The branches should ensure that the note exchange facility is not cornered by private money changers/professional dealers in defective notes. [Ref.Cir.No.S-12/CL.1 (PSB)-88/89 dated 30.9.88 and No.8/ CL.1 (PSB)-90/91 dated 17.8.90]

6.     Our Issue Offices have instructions to conduct training programmes for 'Prescribed Officers' of currency chest branches on a priority basis. It should be ensured that only officers who are designated as 'Prescribed Officers' are deputed for training. As the training programmes are intended to provide knowledge and instil confidence in the Prescribed Officers in the process of adjudication of defective notes, it is imperative that the Prescribed Officers of the concerned branches do attend the programmes. [Ref.Cir.No.220/CL1 (PSB)-85/86 dated 31.5.86]

7.     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 & Exchanged Here". Banks should ensure that all their branches undertake note exchange business. [Ref.Cir.No.G-71/08.07.18/92-93 dated 22.6.93]

8.     With the introduction of bank notes of Rs.1000/- denomination, the word 'five hundred rupees' wherever appearing in the Note Refund Rules has been substituted with the word 'one thousand rupees' and the number '1000' has been added after the number '500'. The effect of the above instruction is that the rules, which are applicable to exchange of double numbered notes upto Rs.500/- denomination, are now applicable to exchange of notes of Rs.1000/- denomination also.

Thus, the notes of Rs.1000/- denomination will be adjudicated under RBI (NR) Rules in the same way as notes of Rs.10/-, Rs.20/-, Rs.50/-, Rs.100/- and Rs.500/- are presently adjudicated. [Press Release dated 6.10.2000]

9.     The notes paid by the non-currency chest branches may get such notes exchanged from the nearest RBI Issue office or currency chest. The currency chest branch may deposit into the currency chest the notes paid for full value by it or such full value paid notes accepted by it from non-chest branches. These notes should however be kept distinctly separate and not mixed with other soiled notes. If note bearing PAY/PAID stamp are found mixed up in soiled note packets during the course of examination of chest remittances received in our Issue Offices, the same shall be returned to the chest representatives/remitted to chest branch at cost after treating it as deficiency which will be recovered by debiting the amount thereof to the account of the concerned bank maintained with our offices. [Ref.Cir.No.G.82/CL.1 (PSB)-87/88 dated 12.1.88 and G.74/CL. (PSB) Gen-90/91 dated 5.6.91]

10.   All chest branches are required to submit to our Issue Offices quarterly statements showing the number of notes adjudicated by them. In the absence of information regarding accumulation of paid notes awaiting audit at chest branches, it is not possible for Issue Offices to finalise quarterly audit programmes. It has also been reported to us that a large number of currency chest branches have either not implemented the scheme or have implemented it on a restricted scale, thereby causing undue hardship to the members of public. In view of this, you are advised to issue the following instructions to all your currency chest branches.

a.     The scheme should be introduced forthwith at the chest branches where it is yet to be started.

b.     There should not be any restrictions as to the number of days in a week on which the facility will be available, i.e. the facility should be made available throughout the business hours on all working days.

c.     Notes paid by non-currency chest branches under limited powers must be accepted for exchange irrespective of whether such branches are of the same bank or otherwise.

d.     The adjudicated notes should be kept distinctly separate and under no circumstances be mixed up with soiled notes balances held in the currency chest.

e.     The record of notes adjudicated/reimbursed must be kept in the DN.2 register properly and up-to-date at the chest branches.

f.      Quarterly statements indicating accumulations of notes adjudicated/exchanged and pending audit by RBI audit teams must be sent within 15 days from the close of the quarter.

[Ref.Cir.No.G.83/CL.1 (PSB)-91/92 dated 6.5.92 and G-11/08.07.18/2001-02 dated 2.11.2001]

All currency chest branches and all the branches of the public sector banks are requested to extend their maximum co-operation by exercising the authority vested in them fully and without reservation as this would result in providing better customer service to the public at large. [Ref.Cir.No.NE.386/08.07.13/2001-02 dated 16.11.2000]

The above instructions are issued in consolidation of all instructions issued earlier by RBI in regard to the exchange of defective notes.

ANNEXURE

MASTER CIRCULAR

SUBJECT: RESERVE BANK OF INDIA (NOTE REFUND) RULES - DELEGATION OF POWERS

List of circulars consolidated by the Master Circular