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Penalty Scheme for Banks on Customer Service Deficiencies

No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/DCM/2025-26/131 · issued 01 Apr 2025 · ~1 min read
Quick answerRBI has issued a consolidated Master Direction on penalties for bank branches and currency chests for poor customer service, covering shortages, counterfeit notes, mutilated notes, and operational lapses. Banks must comply with Clean Note Policy and operational guidelines to avoid fines.

What changed

RBI has consolidated and updated its Scheme of Penalties for bank branches and currency chests into a single Master Direction, issued on April 1, 2025. The scheme specifies penalties for shortages in soiled note remittances, counterfeit notes, mutilated notes, and non-compliance with operational guidelines like CCTV and note sorting machine usage.

What it means for you

Banks face stricter financial penalties for lapses in currency management and customer service, including per-piece fines for shortages and counterfeit notes. Operational failures like non-functional CCTVs or note sorting machines will also attract penalties, increasing compliance costs and operational pressure on branches and currency chests.

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

Who it affects

All scheduled commercial banks, Bank branches handling currency exchange, Currency chest operators, Bank compliance and audit teams

❓ Common questions

Regulatory timeline

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

How are counterfeit notes handled under this scheme?

Banks must examine all notes through machines; failure to impound counterfeit notes detected at their end is construed as wilful involvement in circulating counterfeit notes. Penalty shall be levied in terms of the instructions issued by DCM (FNVD) No.G-4/16.01.05/2025-26 dated April 1, 2025.

📜 Read the original circular — full text as issued by RBI
RBI/DCM/2025-26/131 DCM (CC) No.G-1/03.44.001/2025-26 April 01, 2025 The Chairman / Managing Director / Chief Executive Officer All banks Madam / Dear Sir, Master Direction – Scheme of Penalties for bank branches and currency chests for deficiency in rendering customer service to the members of public In terms of the Preamble to and Section 45 of the Reserve Bank of India Act, 1934 (RBI Act) and Section 35A of the Banking Regulation Act, 1949, Reserve Bank of India issues guidelines / instructions for realising the objectives of Clean Note Policy and enhancing the operational efficiency of currency management. In order to ensure that all bank branches provide proper customer service, the Bank has formulated a Scheme of Penalties for bank branches including currency chests, for deficiency in rendering customer service to the members of public. 2. The Master Direction incorporating the updated guidelines / circulars on the subject is at Annex-I . The Frequently Asked Questions (FAQs) and few Illustrations are at Annexes II and III respectively. Yours faithfully (Sanjeev Prakash) Chief General Manager-In-Charge Encl: As above Annex-I Master Direction on the Scheme of Penalties for bank branches and currency chests for deficiency in rendering customer service to members of public 1. The Scheme of Penalties for bank branches and currency chests has been formulated to ensure that all bank branches / currency chests provide customer service to the members of public / linked bank branches keeping in view the objectives of Clean Note Policy and enhancing operational efficiency. 2. Penalties Penalties to be imposed on banks for non-compliance with operational guidelines and Memorandum of Agreement, deficiencies in remittances sent to RBI, exchange of notes, operations of currency chests, replenishment of cash in ATMs, etc., are as follows: Sr. No.
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/DCM/2025-26/131 · issued 01 Apr 2025. The plain-English explanation above is BankPulse’s own independent summary.
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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12810&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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