What changed
RBI issued a directive under Section 35A of the Banking Regulation Act, 1949, making it mandatory for banks to process all Rs. 100 and higher denomination notes through RBI-prescribed machines before re-issuing them over counters or via ATMs. This follows the Second Quarter Review of Monetary Policy 2009-10 and recommendations from the High Level Group on Currency Distribution.
What it means for you
Banks must now invest in note sorting machines to detect counterfeit notes and ensure only clean, genuine notes are circulated. This adds operational costs and compliance timelines, but reduces counterfeit risk and improves currency quality. Non-compliance could invite regulatory action under the Banking Regulation Act.
What you must do
- Assess average daily cash receipts at each branch to identify those exceeding Rs. 1 crore and those between Rs. 50 lakh and Rs. 1 crore.
- Procure and install RBI-compliant note sorting machines in high-cash branches by the respective deadlines.
- Ensure all Rs. 100 and above notes are machine-processed for authenticity and fitness before re-issue.
- Maintain records of machine compliance and report progress to RBI as required.
Who it affects
All scheduled commercial banks including RRBs, Scheduled state co-operative banks, Scheduled (primary) urban co-operative banks, Bank branches with high daily cash receipts
What denominations are covered under this mandate?
The directive applies to banknotes of Rs. 100 and above denominations only.
What are the deadlines for compliance?
Branches with average daily cash receipts over Rs. 1 crore must comply by March 2010; those with receipts between Rs. 50 lakh and Rs. 1 crore by March 2011.
What happens if a bank fails to install the machines on time?
The directive is issued under Section 35A of the Banking Regulation Act, 1949, so non-compliance may invite regulatory action from RBI.