In a fast changing environment when money is changing hands digitally as financial transactions are being fast moved on to the electronic platform, paper currency still holds ground. When we talk of money, it's the currency note of different denominations which instantly flashes in our mind. And honestly speaking, a currency note in pocket serves as a first-hand confidence booster to its holder.
However, one of the major issues with these currency notes faced by general public has always surfaced when the currency notes get damaged or soiled. Even as these damaged notes are changeable under the Reserve Bank of India's (Note Refund) Rules, the banks' conservative approach in exchanging these notes remained cause of worry for the general public.
To mitigate the suffering of a common man, a termination phase of these notes was set in motion on January 1, 2014 by the Reserve Bank of India (RBI). All banks were directed not to re-issue a soiled, imperfect or mutilated note once it reaches into their custody. The menace of soiled notes got arrested to a large extent as the banks were forced to run special counters to exchange damaged notes.
Efforts to maintain clean currency received a sought of setback when demonetization drive in November 2016 phased out high value currency notes of Rs.500 and Rs.1000 denominations and two new denominations in Rs.200 and Rs.2000 were introduced. These new denomination currency notes were not covered under the RBI (Note Refund Rule), 2009. Banks refused exchange of damaged Rs.200 and Rs.2000 denomination notes.
However, it took the apex bank almost two years to direct the banks to accept damaged new denomination currency notes for exchange. A few weeks back, amendments to Reserve Bank of India (Note Refund) Rules, 2009 were announced. Now As per the rule, people can exchange mutilated or defective notes at RBI offices and designated bank branches across the country for either full or half value, depending upon the condition of the currency.
Notably, the RBI guidelines has mandated three broad categories of currency notes eligible either for exchange or refund. The first category is imperfect notes, including any bank note that has gone through the wash or exchanged so many hands that the print has become indecipherable.
Then there is mutilated note, which refers to currency note that has fallen apart or has been torn up. Even currency notes that have been put together using torn pieces can be exchanged.
The third category is mismatched notes. In the unusual circumstance that you receive a note which is made up of two mismatched pieces stuck together, you can still get it exchanged.
The currency notes that are extremely brittle, badly burnt or stuck together in a way that they can't be separated are not exchangeable. Bank can even refuse to exchange a note if it suspects that the note has been intentionally torn.
For all the damaged notes and accepted for exchange does not mean that one cannot get full value of the note. RBI Note Refund Rules envisage that in case of mutilated notes, you will get a full refund only if the area of the single largest undivided piece of the currency note is greater than 80% of the total area of an undamaged note. If the largest piece is larger than 40% of the area, but less than 80%, you will only receive half the value of the note. If the largest piece is smaller than 40% of the area, you won't get a refund at all.
Meanwhile, one can deposit damaged notes to pay utility bills and taxes or deposit them in a savings bank account.
So, whenever a damaged currency note slips in your hands, you need not to palm it off to the next unsuspecting person you pay in cash, or let it languish in your wallet for months. You have a right to walk into any bank branch and get the damaged notes exchanged.
(The views are of the author & not the institution he works for)