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RBI Mandates Acceptance of Small Denomination Notes and Coins

No longer current — withdrawn, no replacement on file yet

Source: Reserve Bank of India · RBI/2006-2007/349 · issued 25 Apr 2007 · ~2 min read

Quick answerRBI has directed all banks to ensure branches and staff accept small denomination notes and coins without refusal, following a Gujarat High Court case. Non-compliance will invite stern action.

What changed

The Gujarat High Court, in a case involving refusal of a demand draft with a fraction of a rupee, directed RBI to enforce existing instructions on accepting small denomination notes and coins. RBI has now reiterated these instructions to all banks, mandating strict compliance and warning of stern action for refusal.

What it means for you

Banks must train staff to accept lower denomination notes and coins at all counters, as refusal is now a serious regulatory offense. This reinforces customer rights and could lead to penalties for non-compliant branches. Lenders should review their cash handling procedures to avoid legal or regulatory repercussions.

Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.

What banks were required to do at the time

Issue strict internal circulars to all branches mandating acceptance of small denomination notes and coins.
Train all counter staff on these instructions and ensure they are fully conversant with compliance requirements.
Implement monitoring mechanisms to detect and address any refusal incidents promptly.
Prepare for potential audits or inspections by RBI on compliance with this directive.

Who it affects

All scheduled commercial banks, Bank branch managers and staff, Retail customers and small businesses using cash transactions

❓ Common questions

Regulatory timeline

Decoded by BankPulse 2026-06-19 17:12 IST
Status change: withdrawn 05 Aug 2026, 04:00 IST

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

What triggered this RBI directive?

A case before the Gujarat High Court involving a bank's refusal to accept a demand draft with a fraction of a rupee led the court to direct RBI to enforce existing rules on accepting small denomination notes and coins.

What are the consequences for non-compliance?

RBI has warned of stern action against any staff member or branch that refuses to accept small denomination notes or coins, which may include penalties or other regulatory measures.

Does this apply to all types of transactions?

Yes, the directive covers all counter transactions where small denomination notes and coins are tendered, including deposits, payments, and other cash dealings.

📜 Read the original circular — full text as issued by RBI

RBI/2006-2007/349
 DCM(NE)No. 7488 /08.07.18/2006-07
 April 25, 2007
 The Chairman and Managing Director/
 Chief Executive Officer
 All Banks
 Madam/Dear Sir,
 Acceptance of Small Denomination Notes and Coins
 A case involving refusal by a bank to accept demand draft involving fraction of a rupee came up before the Honourable High Court of Gujarat, Ahmedabad. The High Court of Gujarat, taking a serious view of the matter, has directed that appropriate steps may be taken in the matter as also regarding non-acceptance of small denomination notes / coins by banks in accordance with law, in the light of the extant instructions and, if required, issue fresh notifications to all the banks.
 2. You are, therefore, advised to ensure that none of your bank branches/staff refuse to accept lower denomination notes and / or coins. You may issue strict instructions to all branches that the staff concerned should in no case refuse to accept small denomination notes and coins tendered at the counters. It may also be ensured that all the staff members are made fully conversant with the instructions in this regard and also comply strictly with the same. Stern action will be taken in the event of refusal / non-compliance by any staff member.
 3. Please acknowledge receipt.
 Yours faithfully,
 (U.S. Paliwal)
 Chief General Manager

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2006-2007/349 · issued 25 Apr 2007. The plain-English explanation above is BankPulse’s own independent summary.

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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=3456&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.