Torn note refused by bank? Your RBI refund

RBI charges a bank branch ₹10,000 every time its counter is caught refusing to exchange a soiled, mutilated or imperfect note, and ₹5 lakh once that branch crosses five instances in a calendar year. So when a cashier pushes your torn ₹500 back across the counter, it is the branch breaking a rule, not you asking for a favour.

Before you argue with anyone, look hard at the note itself. RBI sorts damaged currency into four boxes, and the box decides both where you must go and how much you can get.

That last row is where people waste a morning. A branch is not permitted to accept a charred or crumbling note, so the cashier saying no is correct there. Nineteen RBI Issue Offices handle these: Ahmedabad, Bangalore, Belapur, Bhopal, Bhubaneswar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthapuram. You may also send such notes by insured post or registered parcel with your account number and IFSC, and the adjudicated value is credited to you.

The refund is not all or nothing. The Reserve Bank of India Note Refund Rules, 2009, as amended in 2018, measure the single largest undivided piece you present as a share of the full area of that denomination.

Read the word undivided slowly, because this is where most claims die. If your ₹500 note is in three fragments, they are not added together. Only the biggest fragment is measured. Three rough thirds get you nothing, while one intact 85% piece gets the full ₹500. The 2018 amendment moved the full value bar for ₹50 and above from more than 65% of the area to more than 80%. RBI made that amendment to cover the Mahatma Gandhi New Series notes, which are physically smaller than the older ones.

An illustration. Meera in Nashik finds two damaged notes in an old purse. On the first ₹500 a corner has burnt away and about 85% survives in one piece, so the branch pays ₹500. On the second, a rat has eaten a section out and the largest surviving piece is roughly 70%, so she is paid ₹250. Same denomination, same counter, different geometry.

One honest caveat. Under Section 28 read with Section 58(2) of the Reserve Bank of India Act, 1934, nobody has an enforceable right to recover the value of a lost, stolen, mutilated or imperfect note. The refund is paid as a matter of grace under the Note Refund Rules. What the branch owes you as a duty is to accept the note and adjudicate it properly. The amount is whatever the area rule says.

• The exchange is free of cost and open to non-customers. Only Payment Banks, and Small Finance Banks in their first two years, may treat mutilated and imperfect note exchange as optional.
• Soiled notes: up to 20 pieces and up to ₹5,000 a day are exchanged over the counter at once. Beyond that, the branch takes them against a receipt, and the credit date on that receipt cannot be more than 7 days away.
• Mutilated or imperfect notes: up to 10 pieces should be adjudicated at the branch and paid across the counter. More than 10 pieces, or above ₹5,000 in a day, are accepted against a receipt for credit later.
• A branch without a currency chest that cannot adjudicate must still take the note against a receipt and send it to its linked currency chest branch. The probable payment date goes on your receipt and cannot exceed 30 calendar days. Give your account number and IFSC.
• Above ₹50,000 tendered, expect extra identity checks.
• The decision is made by the Prescribed Officer, meaning the branch manager or the officer in charge of the cash or accounts wing, who stamps the note PAY, PAID or REJECT and initials it.
• Every branch must display a board reading SOILED/MUTILATED NOTES AND COINS ARE ACCEPTED AND EXCHANGED HERE. Pointing at it settles most arguments.

• A note already carrying a PAY, PAID or REJECT stamp from any RBI office or branch. It has been paid once, and a repeat claim is rejected under Rule 6(2).
• A note with a slogan or message of a political or religious character across it. It ceases to be legal tender and is rejected under Rule 6(3)(iii).
• Defaced notes, and notes deliberately cut, torn, altered or tampered with, rejected under Rule 6(3)(ii). The branch must report the tenderer to RBI, and to the police where such notes come in numbers.

Ordinary scribbling and colour or oil stains are different. Those notes stay legal tender and can be deposited or exchanged at any branch, even though RBI will not reissue them.

The ₹2000 note was withdrawn from circulation on 19 May 2023, and the window to deposit or exchange it at bank branches closed on 7 October 2023. It has not reopened, so a branch turning it away today is not misbehaving.

It is still legal tender. Exchange and deposit continue at the 19 RBI Issue Offices, and you can send ₹2000 notes through India Post from any post office to an Issue Office for credit to your account. In RBI's status update for the month ended 30 April 2026, ₹5,451 crore was still outstanding, meaning 98.47% of the May 2023 stock had come back.

1. Ask for the Prescribed Officer, not the cashier, and point at the notice board.
2. Complain in writing to the branch and keep the acknowledgement number. The ombudsman scheme requires you to approach the bank first, with proof.
3. Wait 30 days. You can move sooner only if the bank has already replied and you are dissatisfied.
4. Escalate to the RBI Ombudsman under the Reserve Bank Integrated Ombudsman Scheme, 2026, in force from 1 July 2026 in place of the 2021 scheme. File at cms.rbi.org.in, email [email protected], or post to the Centralised Receipt and Processing Centre, Reserve Bank of India, Central Vista, Sector 17, Chandigarh 160017.
5. File within 90 days of that deadline expiring or of the bank's last communication, whichever is later.
6. Helpline 14448 is toll free. The recorded system runs 24×7 and a person answers from 8 AM to 10 PM, Monday to Saturday except national holidays, in English, Hindi and ten regional languages.

There is no fee. Refusal to exchange is a plain deficiency in service, which is what the scheme covers, and the Ombudsman can award up to ₹30 lakh for consequential loss plus up to ₹3 lakh for your time, expenses and harassment. The same ladder is set out step by step in our guide to RBI doorstep banking for senior citizens. Keep one thing straight: the ₹10,000 penalty is paid by the branch to RBI when RBI officials detect the refusal through inspection or an incognito visit. It is not compensation to you.

RBI is a public authority under the Right to Information Act, 2005. A short application to its Department of Currency Management, asking how many penalties for refusal to exchange notes were levied in your state over the last two financial years and whether the branch you are complaining about is among them, turns a personal grievance into a documented pattern. Draft it with the AI RTI Drafter, run the clock with the Timeline Tracker, test a dodgy reply in the PIO Reply Checker, then use the First Appeal Builder. The method is in The RTI Playbook.

No. RBI requires banks to ensure all their branches provide note and coin exchange not only to their own customers but also to others, on every working day and without discrimination.

No. Exchange of mutilated and imperfect notes under the branch delegation is free of cost, and small lots of soiled notes go over the counter free. Service charges may apply only for soiled notes tendered in bulk beyond 20 pieces or ₹5,000 a day.

No. Only the single largest undivided piece is measured. Three fragments of roughly a third each all fall below 40% of the note area, so the claim is rejected even though you are holding the whole note.

A branch is not permitted to handle it. Take it, or send it by insured post or registered parcel, to one of the 19 RBI Issue Offices, where it is adjudicated under a special procedure and the value credited to your account.

The receipt must carry a probable payment date. For bulk soiled notes it cannot be more than 7 days away. Where mutilated notes go to a linked currency chest branch, it cannot exceed 30 calendar days, and payment comes electronically.

Not at a bank branch. That ended on 7 October 2023. The note remains legal tender and can be exchanged or deposited at any of the 19 RBI Issue Offices, or sent to one through India Post for credit to your account.

Yes. Notes with scribbling or colour and oil stains stay legal tender and can be deposited or exchanged at any branch. Only a message of a political or religious character across the note makes it non payable.

No. RBI levies it on the offending branch when its officials detect the deficiency in service, rising to ₹5 lakh where a branch records more than five instances in a calendar year. The levy is placed in the public domain, but it is not customer compensation.

Complain to the bank first. If there is no reply within 30 days, or the reply does not satisfy you, file with the RBI Ombudsman within 90 days of that deadline expiring or of the bank's last communication, whichever is later.

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