New Delhi, Jun 14: While the problem of banks handing out torn and mutilated currency to depositors has hogged the limelight off late, the bank customers’ woes may be far from over. Many banks are refusing to exchange old and torn notes of the Rs 2,000 denomination with many saying that the Reserve Bank of India (RBI) does not have any rules in place that require banks to exchange torn Rs 2,000 notes carried by a depositor. Bank officials manning cash counters are turning away customers saying that they should “hold on to their torn Rs 2,000 notes till RBI comes out with a policy to exchange such notes.”
When certain officials at some bank branches were reminded that the RBI has rules for replacement of all torn currency, they said that the old rules do not apply to the new denomination of Rs 2,000 and Rs 200. So why are banks refusing to exchange soiled Rs 2,000 notes by throwing the rule book at customers?
The RBI has robust rules in place for exchange of soiled currency but banks seem to be interpreting them in a way to exclude those with Rs 2,000 denomination from the exchange process. The Reserve Bank of India (Note Refund) Rules 2009 clearly lay down rules for all mutilated notes above the denomination of Rs 50. The rules regarding mutilated notes states, “if the area of the single largest undivided piece of the mutilated note of rupees fifty, rupees one hundred, rupees five hundred and rupees one thousand note presented is at least 70, 75, 80 and 84 square centimeters, respectively, the same may be paid for full value.” The rules further state if the mutilated notes presented to banks is less than these specifications, banks need to pay only half the value on the same.
While these rules pertained to the pre-demonetisation era, the Rs 1,000 note was declared illegal and replaced by the Rs 2,000 note on November 8, 2016. Banks seem to be reluctant to apply the rules that pertained to the Rs 1,000 note to the new Rs 2,000 note. The last time RBI amended its note exchange rules was on July 3, 2017. These new rules states, “In order to facilitate quicker exchange facilities, the definition of soiled note has been expanded. A ‘soiled note’ means a note which has become dirty due to normal wear and tear and also includes a two piece note pasted together wherein both the pieces presented belong to the same note and form the entire note with no essential feature missing. These notes should be accepted over bank counters in payment of Government dues and for credit to accounts of the public maintained with banks.”
While the RBI’s new rules clearly define ‘a soiled note’ irrespective of their denomination, banks seem to be interpreting it in a way to exclude the Rs 2,000 note from the definition. One reason for this behaviour of banks is that the RBI’s new rules which were announced after the note-ban episode do not specify the Rs 2,000 note in particular.