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RBI Mandates Note Sorting Machines at All Currency Chests

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Source: Reserve Bank of India · RBI/2004-05/340 · issued 06 Jan 2005 · ~2 min read
Quick answerRBI has ordered all banks with currency chests to install table-top note sorting machines at every chest branch by May 2005 (for banks with ≤100 chests) or November 2005 (for larger banks) to curb forged notes in remittances.
The rule, in the simplest words
How it plays out — a real example

A forex & trade-finance officer in Indore, Priya, manages a bank with 50 currency chests. She quickly orders table-top note sorting machines for all her chests by May 2005, so her team can check every note before sending it to RBI, stopping fake notes from getting into the system and avoiding penalties.

What changed

RBI observed that despite earlier circulars, forged notes continue to be detected in chest remittances. It now mandates a time-bound plan: banks with up to 100 currency chests must install sorting machines by end-May 2005 and submit an Action Taken Report (ATR) by May 31, 2005; banks with more than 100 chests have until end-November 2005 with ATR by November 30, 2005. The installation program must be reported to RBI's Issue Offices within one month.

What it means for you

Banks must urgently invest in table-top note sorting machines for all chest branches to prevent forged notes from re-entering circulation. This will increase operational costs but reduce RBI penalties and reputational risk from counterfeit detection. Chest branches must now sort notes before remittance, ensuring only reissuable notes go to the public and soiled notes are sent to RBI.

What you must do

Who it affects

All banks operating currency chests, Chest branch managers and operations teams, Bank procurement and IT departments, RBI Issue Offices

❓ Common questions

What happens if we miss the installation deadline?

The circular does not specify penalties, but RBI expects strict compliance to curb forged notes. Non-compliance may lead to regulatory action or increased scrutiny of chest operations.

Do we need sorting machines at every branch or only chest branches?

The mandate is specifically for all currency chest branches. Non-chest branches are not covered by this circular, but earlier guidance urged careful examination at receipt.

What capacity of sorting machine is required?

RBI says 'appropriate capacity' but does not define specific throughput. Banks should choose machines that handle their chest's average daily note volume efficiently.

📜 Read the original circular — full text as issued by RBI
RBI/2004-05/340 DCM (CC) No. G. 35 /03.02.01/2004-05 January 06, 2005 The Chairman and Managing Director / Chief Executive Officer (All banks having currency chests) Dear Sir, Detection of Forged Notes in Chest Remittances Please refer to our Circular DCM (FNVD) No. G.39/16.01.01/2003-04 dated 07 th June 2004 on the captioned subject wherein we had stressed the need for careful examination of notes by the branches / chest branches of banks at the time of receipt itself so as to prevent the re-entry of forged notes into circulation and the inclusion of forged notes in the remittances sent to RBI Offices. It was also indicated in the above circular that necessary infrastructural facilities like sorting machines for proper sorting/identification of suspect notes should be provided at branches, particularly chest branches. However, on a recent review of the position, it is observed that large number of forged notes continue to be detected in the remittances sent by currency chests. 2. It has, therefore, been decided to stipulate a time-bound plan to arrest the increasing trend in the circulation of forged notes through the banking channel. We shall therefore be glad if you will please arrange to provide table top note sorting machines of appropriate capacity at all the chest branches as per the time frame indicated below : Banks that have up to 100 currency chests should install note sorting machines of appropriate capacity at all their currency chests by the end of May 2005 and submit Action Taken Report (ATR) to the Bank on May 31, 2005. Banks having more than 100 currency chests should provide such machines in a phased manner by the end of November 2005 and submit Action Taken Report on November 30, 2005. The programme for installation of the machines should be reported by your Zonal/Circle/Regional Offices to the concerned Issue Offices of RBI within one month. 3. The sorting machines being installed should be utilised to ensure that only reissuable notes are issued to the public and all soiled notes are remitted to the respective Issue Offices of the Bank. Please acknowledge receipt. Yours faithfully, sd/ (U S Paliwal) Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2004-05/340 · issued 06 Jan 2005. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
🏦 Branch Manager
  • Procure and install table-top note sorting machines of appropriate capacity at all chest branches by the respective deadline.
📜 Compliance
  • Assess your bank's total currency chest count and classify as ≤100 or >100 to determine the deadline.
  • Submit the installation program to your Zonal/Circle/Regional Office for reporting to RBI's Issue Offices within one month.
  • Ensure sorting machines are used to separate reissuable notes from soiled notes before public issue or RBI remittance.
  • Prepare and submit the Action Taken Report (ATR) to RBI by May 31, 2005 (≤100 chests) or November 30, 2005 (>100 chests).
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (All banks operating currency chests, Chest branch managers and operations teams, Bank procurement and IT departments, RBI Issue Offices), your first concrete step on “RBI Mandates Note Sorting Machines at All Currency Chests” is: “Assess your bank's total currency chest count and classify as ≤100 or >100 to determine the deadline.” (RBI issued this 06 Jan 2005).

  1. Circular: RBI/2004-05/340 -- RBI Mandates Note Sorting Machines at All Currency Chests
  2. Issued: 06 Jan 2005
  3. Action required: Assess your bank's total currency chest count and classify as ≤100 or >100 to determine the deadline.
  4. Action required: Procure and install table-top note sorting machines of appropriate capacity at all chest branches by the respective deadline.
  5. Action required: Submit the installation program to your Zonal/Circle/Regional Office for reporting to RBI's Issue Offices within one month.
  6. Action required: Ensure sorting machines are used to separate reissuable notes from soiled notes before public issue or RBI remittance.
  7. Action required: Prepare and submit the Action Taken Report (ATR) to RBI by May 31, 2005 (≤100 chests) or November 30, 2005 (>100 chests).
  8. Owner: ____________ Target date: ____________
  9. Board/committee approval needed? Y / N
  10. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=2097&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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