Reserve Bank’s Instructions on Banking matters

 1.      How is the computation of interest on savings bank deposits done by banks?

With effect from April 1, 2010 payment of interest on savings bank accounts by scheduled commercial banks would be calculated on a daily product basis.

2. What is the Base Rate System?

1. The Base Rate system has replaced the erstwhile Benchmark Prime Lending Rate system with effect from July 1, 2010. Base Rate shall include all those elements of the lending rates that are common across all categories of borrowers. Banks may choose any benchmark to arrive at the Base Rate for a specific tenor that may be disclosed transparently. Banks are free to use any methodology, as considered appropriate, provided it is consistent and is made available for supervisory review/scrutiny, as and when required.
2. Banks may determine their actual lending rates on loans and advances with reference to the Base Rate and by including such other customer specific charges as considered appropriate.

3. Banks are required to review the Base Rate at least once in a quarter with the approval of the Board or the Asset Liability Management Committees (ALCOs) as per the bank’s practice. Since transparency in the pricing of lending products has been a key objective, banks are required to exhibit the information on their Base Rate at all branches and also on their websites. Changes in the Base Rate should also be conveyed to the general public from time to time through appropriate channels. Banks are required to provide information on the actual minimum and maximum lending rates to the Reserve Bank on a quarterly basis, as hitherto.

3. Are any exemptions available from the Base Rate Regime?

All categories of loans should henceforth be priced only with reference to the Base Rate. However, the following categories of loans could be priced without reference to the Base Rate: (a) DRI advances (b) loans to banks’ own employees (c) loans to banks’ depositors against their own deposits.

4. Can the Base Rate serve as a benchmark for floating loan product?

The Base Rate could also serve as the reference benchmark rate for floating rate loan products, apart from external market benchmark rates. The floating interest rate based on external benchmarks should, however, be equal to or above the Base Rate at the time of sanction or renewal.

5. Can banks extend loans/advances below Base Rate?

Since the Base Rate will be the minimum rate for all loans, banks are not permitted to resort to any lending below the Base Rate. Accordingly, the current stipulation of BPLR as the ceiling rate for loans up to Rs. 2 lakh stands withdrawn.

6. Whether the BPLR regime is still in operation.

From July 1,  2010 the Benchmark Prime Lending Rate system has been replaced by the Base Rate mechanism. However, for loans sanctioned prior to July 1, 2010 the BPLR regime is applicable. The renewal of such loans would however, be covered under the Base rate mechanism.

7. What are the parameters to be adopted for identifying basic banking services?

Banks have been advised to identify basic banking services on the basis of two parameters indicated by the Working Group, namely, (i) banking services that are ordinarily availed by individuals in the middle and lower segments and (ii) the value of transactions, namely, cheque collections and remittances up to Rs. 10,000 for each transaction  and up to $500 for forex transactions. The indicative list of banking services includes services relating to Deposit Accounts (cheque book facility, issue of pass book / statement, ATM Card, Debit Card, stop payment, balance enquiry, account closure, cheque return - inward, signature verification); Loan Accounts (no dues certificate); Remittance facilities (Demand Draft – issue/ cancellation/ revalidation, Payment Order - issue/ cancellation/ revalidation/ duplicate, Telegraphic Transfer - issue/ cancellation/ duplicate, Electronic Clearing Service (ECS), National Electronic Fund Transfer (NEFT) / Electronic Fund Transfer (EFT); Collection Facilities (collection of local /outstation cheques, cheque return- outward). Banks are required to implement the recommendations of the Working Group on making available the basic banking services at reasonable prices/ charges and   towards this, delivering the basic services outside the scope of the bundled products.

8. What are the other steps to be taken by banks?

Banks are required to take steps to ensure that customers are made aware of the service charges upfront and changes in the service charges are implemented only with prior notice to the customers.  Banks are also required to have a robust grievance redressal structure and processes, to ensure prompt in-house redressal of all their customer complaints. Further, full-fledged information on bank products and their implications should be disclosed to the customers, so that the customers can make an informed judgment about their choice of products.

9. What is RTGS System?

Ans. The acronym 'RTGS' stands for Real Time Gross Settlement, which can be defined as the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting). 'Real Time' means the processing of instructions at the time they are received rather than at some later time; 'Gross Settlement' means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). Considering that the funds settlement takes place in the books of the Reserve Bank of India, the payments are final and irrevocable.

10. How RTGS is different from National Electronics Funds Transfer System (NEFT)?

Ans. NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place with all transactions received till the particular cut-off time. These transactions are netted (payable and receivables) in NEFT whereas in RTGS the transactions are settled individually. For example, currently, NEFT operates in hourly batches. [There are twelve settlements from 8 am to 7 pm on week days and six settlements from 8 am to 1 pm on Saturdays.] Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time Contrary to this, in the RTGS transactions are processed continuously throughout the RTGS business hours.

11. Is there any minimum / maximum amount stipulation for RTGS transactions?

Ans. The RTGS system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is Rs.  2 lakh. There is no upper ceiling for RTGS transactions.

12. What is the time taken for effecting funds transfer from one account to another under RTGS?

Ans. Under normal circumstances the beneficiary branches are expected to receive the funds in real time as soon as funds are transferred by the remitting bank. The beneficiary bank has to credit the beneficiary's account within 30 minutes of receiving the funds transfer message.

13. Would the remitting customer receive an acknowledgement of money credited to the beneficiary's account?

Ans. The remitting bank receives a message from the Reserve Bank that money has been credited to the receiving bank. Based on this the remitting bank can advise the remitting customer through SMS that money has been credited to the receiving bank.

14. Would the remitting customer get back the money if it is not credited to the beneficiary's account? When?

Ans. Yes. Funds, received by a RTGS member for the credit to a beneficiary customer’s account, will be returned to the originating RTGS member within one hour of the receipt of the payment at the PI of the recipient bank or before the end of the RTGS Business day, whichever is earlier, if it is not possible to credit the funds to the beneficiary customer’s account for any reason e.g. account does not exist, account frozen, etc. Once the money is received back by the remitting bank, the original debit entry in the customer's account is reversed.

15. Till what time RTGS service window is available?

Ans. The RTGS service window for customer's transactions is available to banks from 9.00 hours to 16.30 hours on week days and from 9.00 hours to 14:00 hours on Saturdays for settlement at the RBI end. However, the timings that the banks follow may vary depending on the customer timings of the bank branches.

16. What about Processing Charges / Service Charges for RTGS transactions?

Ans With a view to rationalize the service charges levied by banks for offering funds transfer through RTGS system, a broad framework has been mandated as under:

a) Inward transactions – Free, no charge to be levied.

b) Outward transactions – RS. 2 lakh to Rs. 5 lakh - not exceeding RS.  30.00 per transaction;
Above RS.  5 lakh – not exceeding Rs.  55.00 per transaction.

17. What is the essential information that the remitting customer would have to furnish to a bank for the remittance to be effected?

Ans. The remitting customer has to furnish the following information to a bank for initiating a RTGS remittance:

1. Amount to be remitted
2. Remitting customer’s account number which is to be debited
3. Name of the beneficiary bank and branch
4. The IFSC Number of the receiving branch
5. Name of the beneficiary customer
6. Account number of the beneficiary customer
7. Sender to receiver information, if any

18. How would one know the IFSC number of the receiving branch?

Ans. The beneficiary customer can obtain the IFSC code from his bank branch. The IFSC code is also available on the cheque leaf. The list of IFSCs is also available on the RBI website (http://rbidocs.rbi.org.in/rdocs/RTGS/DOCs/RTGEB0112.xls). This code number and bank branch details can be communicated by the beneficiary to the remitting customer.

19. Do all bank branches in India provide RTGS service?

Ans. No. All the bank branches in India are not RTGS enabled. Presently, there are more than 100,000 RTGS enabled bank branches. The list of such branches is available on RBI website at: http://rbidocs.rbi.org.in/rdocs/RTGS/DOCs/RTGEB0112.xls.

20. Is there any way that a remitting customer can track the remittance transaction?

Ans It would depend on the arrangement between the remitting customer and the remitting bank. Some banks with internet banking facility provide this service. Once the funds are credited to the account of the beneficiary bank, the remitting customer gets a confirmation from his bank either by an e-mail or SMS. Customer may also contact RTGS / NEFT Customer Facilitation Centres of the banks, for tracking a transaction.

Currency Matters

Your Guide to Money Matters

For a common person, money simply means currency and coins. This is so because in India, the payment system, which includes credit cards and electronic cash, still revolves mainly around currency and coins, especially for retail transactions. Here is an attempt to answer some of the Frequently Asked Questions on Indian Currency.

A) Some Basics

I. Coins

Coins in India are presently being issued in denominations of 50 paise, one rupee, two rupees, five rupees and ten rupees. Coins up to 50 paise are called 'small coins' and coins of Rupee one and above are called 'Rupee Coins'. Coins in the denomination of 1 paise, 2 paise, 3 paise, 5 paise, 10 paise, 20 paise and 25 paise have been withdrawn from circulation with effect from June 30, 2011 and are, therefore, no more legal tender.

II. Currency:

Banknotes in India are currently being issued in the denomination of Rs. 10, Rs.  20, Rs. 50, Rs.  100 Rs.  500, and `1000. These notes are called banknotes as they are issued by the Reserve Bank of India (Reserve Bank). The printing of notes in the denominations of Rs. 1, Rs.  2 and Rs.  5 has been discontinued as these denominations have been coinised. However, such banknotes issued earlier can still be found in circulation and these banknotes continue to be legal tender.

What is the Indian currency called?

The Indian currency is called the Indian Rupee (INR) and the coins are called paise. One Rupee consists of 100 paise. The symbol of the Indian Rupee is `. The design resembles both the Devanagari letter "`" (ra) and the Latin capital letter "R", with a double horizontal line at the top.

Can banknotes and coins be issued only in these denominations?

Not necessarily. The Reserve Bank can also issue banknotes in the denominations of five thousand rupees and ten thousand rupees, or any other denomination that the Central Government may specify. However, there cannot be banknotes in denominations higher than ten thousand rupees in terms of the current provisions of the Reserve Bank of India Act, 1934. Coins can be issued up to the denomination of Rs.1000 in terms of The Coinage Act, 2011.

Demonetization of higher denomination banknotes.

Rs.  1000 and Rs.  10000 banknotes, which were then in circulation were demonetized in January 1946, primarily to curb unaccounted money. The higher denomination banknotes in Rs.  1000, Rs.  5000 and Rs.  10000 were reintroduced in the year 1954, and these banknotes (Rs.  1000, Rs.  5000 and Rs.  10000) were again demonetized in January 1978.

What is legal tender?

The coins issued under the authority of Section 6 of The Coinage Act, 2011, shall be legal tender in payment or on account i.e. provided that a coin has not been defaced and has not lost weight so as to be less than such weight as may be prescribed in its 
case: - (a) coin of any denomination not lower than one rupee shall be legal tender for any sum, (b) half rupee coin shall be legal tender for any sum not exceeding ten rupees,

Every banknote issued by Reserve Bank of India (Rs.  2, Rs.  5, Rs.  10, Rs.  20, Rs.  50, Rs.  100, Rs. 500 and Rs. 1000) shall be legal tender at any place in India in payment or on account for the amount expressed therein, and shall be guaranteed by the Central Government, subject to provisions of sub-section (2) Section 26 of RBI Act, 1934.

What is the meaning of "I promise to pay" clause?

As per Section 26 of Reserve Bank of India Act, 1934, the Bank is liable to pay the value of banknote. This is payable on demand by RBI, being the issuer. The Bank's obligation to pay the value of banknote does not arise out of a contract but out of statutory provisions.

The promissory clause printed on the banknotes i.e., "I promise to pay the bearer the sum of Rupees …is a statement which means that the banknote is a legal tender for the specified amount. The obligation on the part of the Bank is to exchange a banknote with bank notes of lower value or other coins which are legal tender under the Indian Coinage Act, 2011, of an equivalent amount.

Why is One Rupee liability of the Government of India?

The One Rupee notes issued under the Currency Ordinance, 1940 are also legal tender and included in the expression Rupee coin for all the purposes of the Reserve Bank of India Act, 1934. Since the rupee coins issued by Government constitute the liabilities of the Government, one rupee is also liability of the Government of India.

B) Currency Management.

What is the role of the Reserve Bank of India in currency management?

The Reserve Bank derives its role in currency management from the Reserve Bank of India Act, 1934.The Reserve Bank manages currency in India. The Government, on the advice of the Reserve Bank, decides on various denominations of banknotes to be issued. The Reserve Bank also co-ordinates with the Government in the designing of banknotes, including the security features. The Reserve Bank estimates the quantity of banknotes that are likely to be needed denomination-wise and accordingly, places indent with the various printing presses. The aim of the Reserve Bank is to provide good quality notes to members of public. Towards this aim, the banknotes received back from circulation are examined and those fit for circulation are reissued and the others (soiled and mutilated) are destroyed so as to maintain the quality of banknotes in circulation.

What is the role of Government of India?

In terms of Section 25 of RBI Act, 1934 the design of banknotes is required to be approved by the Central Government on the recommendations of the Central Board of the Reserve Bank of India. The responsibility for coinage vests with the Government of India on the basis of the Coinage Act, 2011 as amended from time to time. The Government of India is also responsible for the designing and minting of coins in various denominations.

Who decides on the figure to be printed on a new note?

The Government of India in consultation with the Reserve Bank of India decided on the design of banknotes.

What happens to the old design notes when a new design is introduced?

Both old and new design notes usually circulate together for a while. The old design notes are then gradually withdrawn from circulation when they become unfit to be re-issued.

Are old notes issued by the Reserve Bank of India worthless?

No. The Reserve Bank of India does not withdraw the legal tender character of notes issued in the past. All RBI notes retain their face value till any specific communication from RBI to the contrary. These notes can be exchanged at any bank branch. However, the above does not apply to the higher denomination banknotes of Rs. 1000, Rs. 5000 and Rs.10000 that were demonetized in 1978.

What was the highest denomination note ever printed?

The highest denomination note ever printed by the Reserve Bank of India was the Rs. 10000 note in 1938 and again in 1954. These notes were demonetized in 1946 and again in 1978.

What is the role of RBI in issue of coins?

The role of RBI is limited to distribution of coins that are supplied by Government of India. The responsibility for coinage vests with the Government of India on the basis of the Coinage Act, 2011, as amended from time to time.

Who is responsible for changing the design of coins from time to time?

The Government of India is responsible for the designing and minting of coins in various denominations.

What is currency paper made of?

Currency paper is composed of cotton and cotton rag.

Who decides on the volume and value of banknotes to be printed and on what basis?

The Reserve Bank based on the demand requirement indicates the volume and value of banknotes to be printed each year to the Government of India which get finalized after mutual consultation. The quantum of banknotes to be printed, broadly depends on the requirement for meeting the demand for banknotes, GDP growth, replacement of soiled banknotes, reserve stock requirements, etc.

Who decides on the quantity of coins to be minted?

The Government of India decides on the quantity of coins to be minted on the basis of indents received from the Reserve Bank.

How does the Reserve Bank estimate the demand for banknotes?

The Reserve Bank estimates the demand for banknotes on the basis of the growth rate of the economy, inflation rate, the replacement demand and reserve stock requirements by using statistical models/techniques.

Where are notes and coins produced?

Notes are printed at four printing presses located at Nashik, Dewas, Mysore and Salboni. Coins are minted at the four mints at Mumbai, Noida, Kolkata and Hyderabad.

How does the Reserve Bank reach the currency to people?

The Reserve Bank presently manages the currency operations through its 19 Issue offices located at Ahmedabad, Bangalore, Belapur, Bhopal, Bhubaneswar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, New Delhi, Patna, Thiruvananthapuram, a currency chest at Kochi and a wide net work of currency chests. These offices receive fresh banknotes from the banknote printing presses. The Issue Offices of RBI send fresh banknote remittances to the designated branches of commercial banks.

The Reserve Bank offices located at Hyderabad, Kolkata, Mumbai and New Delhi (Mint linked Offices) initially receive the coins from the mints. These offices then send them to the other offices of the Reserve Bank who in turn send the same to currency chests and small coin depots. The banknotes and rupee coins are stocked at the currency chests and small coins at the small coin depots. The bank branches receive the banknotes and coins from the Currency Chests and Small Coin Depots for further distribution among the public.

What is a currency chest?

To facilitate the distribution of banknotes and rupee coins, the Reserve Bank has authorised select branches of scheduled banks to establish currency chests. These are actually storehouses where banknotes and rupee coins are stocked on behalf of the Reserve Bank. As on December 31, 2013, there were 4209 currency chests. The currency chest branches are expected to distribute banknotes and rupee coins to other bank branches in their area of operation.

What is a small coin depot?

Some bank branches are authorised to establish Small Coin Depots to stock small coins i.e. coins below Rupee one. The Small Coin Depots also distribute small coins to other bank branches in their area of operation. As on December 31, 2013, there were 3966 small coin depots.

What happens when the banknotes and coins return from circulation?

Banknotes returned from circulation are deposited at the Issue offices of the Reserve Bank. The Reserve Bank subjects these to processing, authenticates banknotes for their genuineness, segregates them into notes fit for reissue and those which are unfit, for cancellation. The banknotes which are fit for reissue are sent back in circulation and those which are unfit for reissue are destroyed by way of shredding after completion of examination process. Coins do not come back from circulation, except those which are withdrawn.

From where can the general public obtain banknotes and coins?

Presently, banknotes and coins can be obtained in exchange at RBI offices and all branches of banks. This function is being delegated by RBI to commercial banks.

C) Soiled and Mutilated Banknotes

What are soiled, mutilated and imperfect banknotes?

(i) "soiled note:" means a note which, has become dirty due to usage and also includes a two piece note pasted together wherein both the pieces presented belong to the same note, and form the entire note.

(ii) Mutilated banknote is a banknote, of which a portion is missing or which is composed of more than two pieces.

(iii) Imperfect banknote means any banknote, which is wholly or partially, obliterated, shrunk, washed, altered or indecipherable but does not include a mutilated banknote.

Can soiled and mutilated banknotes be exchanged for value?

Yes. Such banknotes can be exchanged for value.

Where are soiled/mutilated banknotes accepted for exchange?

All banks are authorized to accept soiled banknotes for full value. They are expected to extend the facility of exchange of soiled notes even to non-customers. All branches of commercial banks are authorised to adjudicate mutilated banknotes and pay value for these, in terms of the Reserve Bank of India (Note Refund) Rules, 2009

How much value would one get in exchange of soiled banknotes?

Soiled banknotes are exchanged for full value.

How much value would one get in exchange of mutilated banknotes?

A mutilated banknote can be exchanged for full value if,

(i) For denominations of   Rs. 1,   Rs. 2,   Rs. 5,   Rs. 10 and   Rs. 20, the area of the single largest undivided piece of the note presented is more than 50 percent of the area of respective denomination, rounded off to the next complete square centimeter.

(ii) For denominations of   Rs. 50,   Rs. 100,   Rs. 500 and   Rs. 1000, the area of the single largest undivided piece of the note presented is more than 65 percent of the area of respective denomination, rounded off to the next complete square centimeter.

Banknotes in denominations of   Rs. 1,   Rs. 2,   Rs. 5,   Rs. 10 and   Rs. 20, cannot be exchanged for half value.

A mutilated banknote in denominations of   Rs. 50,   Rs. 100,   Rs. 500 or   Rs. 1000, can be exchanged for half value if,

The undivided area of the single largest piece of the note presented is equal to or more than 40 percent and less than or equal to 65 percent of the area of respective denomination, rounded off to the next complete square centimeter.

How much value would one get in exchange of imperfect banknotes?

The value of an imperfect note may be paid for full value / half value under rules as specified for mutilated notes if,

(i) the matter, which is printed on the note has not become totally illegible, and

(ii) it can be established that it is a genuine note.

What types of banknotes are not eligible for payment under the Note Refund Rules?

The following banknotes are not payable under the Reserve Bank of India (Note Refund) Rules 2009.

A banknote for which:

• the area of single largest undivided piece of note presented is less than or equal to 50% of area of the note for denominations of   Rs. 1,   Rs. 2,   Rs. 5,   Rs. 10 and   Rs. 20.
• the area of the single largest undivided piece of the note is less than 40 percent for denominations of    Rs.50,   Rs. 100,   Rs. 500 or   Rs.1000.

A banknote which:

• cannot be identified with certainty as a genuine note for which the Bank is liable under the Act,

• has been made imperfect or mutilated, thereby causing the note to appear to be of a higher denomination, or has been deliberately cut, torn, defaced, altered or dealt with in any other manner, not necessarily by the claimants, enabling the use of the same for making of a false claim under these rules or otherwise to defraud the Bank or the public,
• carries any extrinsic words or visible representations intended to convey or capable of conveying any message of a political or religious character or furthering the interest of any person or entity,

has been imported into India by the claimant from any place outside India in contravention of the provision of any law.

Is the serial number used when assessing the value of a damaged banknotes

The presence or absence of a serial number or other specific feature is not a determining factor when assessing damaged banknotes for value.

What if a banknote is found to be non-payable?

Non-payable banknotes are retained by the receiving banks and sent to the Reserve Bank where they are destroyed.

Can Indian banknotes be obtained with specific serial numbers?

Issuing banknotes with specific numbers may not be possible.

How many languages appear in the language panel of Indian banknotes?

There are fifteen languages appearing in the language panel of banknotes in addition to Hindi prominently displayed in the centre of the note and English on the reverse of the banknote.

D) Banknotes since Independence.

i. Ashoka Pillar Banknotes:

The first banknote issued by independent India was the one rupee note issued in 1949. While retaining the same designs the new banknotes were issued with the symbol of Lion Capital of Ashoka Pillar at Sarnath in the watermark window in place of the portrait of King George.

The name of the issuer, the denomination and the guarantee clause were printed in Hindi on the new banknotes from the year 1951. The banknotes in the denomination of   Rs.1000,   Rs.5000 and   Rs.10000 were issued in the year 1954. Banknotes in Ashoka Pillar watermark Series, in   Rs.10 denomination were issued between 1967 and 1992,   Rs. 20 denomination in 1972 and 1975,   Rs. 50 in 1975 and 1981, and   Rs.100 between 1967-1979. The banknotes issued during the above period, contained the symbols representing science and technology, progress, orientation to Indian Art forms. In the year 1980, the legend "Satyameva Jayate", i.e., truth alone shall prevail was incorporated under the national emblem for the first time. In October 1987,   Rs.500, banknote was introduced in October 1987 with the portrait of Mahatma Gandhi and the Ashoka Pillar watermark.

ii. Mahatma Gandhi (MG) Series 1996

The banknotes in MG Series – 1996 were issued in the denominations of   Rs. 5, (introduced in November 2001)   Rs. 10 (June 1996),   Rs.20 (August 2001),   Rs. 50 (March 1997),   Rs.100 (June 1996),   Rs. 500 (October 1997) and   Rs.1000 (November 2000). All the banknotes of this series bear the portrait of Mahatma Gandhi on the obverse (front) side, in place of symbol of Lion Capital of Ashoka Pillar, which has also been retained and shifted to the left side next to the watermark window. This means that these banknotes contain Mahatma Gandhi watermark as well as Mahatma Gandhi's portrait.

iii MG series – 2005 banknotes

MG series 2005 banknotes are issued in the denomination of   Rs.10,   Rs.20,   Rs.50,   Rs.100,  Rs.500 and   Rs.1000 and contain some additional / new security features as compared to the 1996 MG series. The   Rs.50 and   Rs.100 banknotes were issued in August 2005, followed by  Rs.500 and   Rs.1000 denominations in October 2005 and   Rs.10 and   Rs.20 in April 2006 and August 2006, respectively.

The security features in MG Series 2005 banknotes are as under:

1. Security Thread: The silver coloured machine-readable security thread in denomination Rs. 10,      Rs. 20,   Rs. 50 banknotes is windowed on front side and fully embedded on reverse side. The thread fluoresces in yellow on both sides under ultraviolet light. The thread appears as a continuous line from behind when held up against light. Rs. 100,  Rs. 500 and   Rs. 1000 denomination banknotes have machine-readable windowed security thread with colour shift from green to blue when viewed from different angles. It fluoresces in yellow on the reverse and the text will fluoresce on the obverse under ultraviolet light. Other than on Rs. 1000 banknotes, the security thread contains the words 'Bharat' in the Devanagari script and 'RBI' appearing alternately. The security thread of the  Rs. 1000 banknote contains the inscription 'Bharat' in the Devanagari script, '1000' and 'RBI'.
2. Intaglio Printing: The portrait of Mahatma Gandhi, Reserve Bank seal, Guarantee and promise clause, Ashoka Pillar emblem, RBI’s Governor's signature and the identification mark for the visually impaired persons are printed in improved intaglio.
3. See through register: On the left side of the note next to the watermark window, half the numeral of each denomination (10, 20, 50, 100, 500 and 1000) is printed on the obverse (front) and half on the reverse. The accurate back to back registration makes the numeral appear as one when viewed against light.
4. Water Mark and electrotype watermark: The banknotes contain the portrait of Mahatma Gandhi in the watermark window with a light and shade effect and multi-directional lines. An electrotype mark showing the denominational numeral 10, 20, 50, 100, 500 and 1000 respectively in each denomination banknote also appear in the watermark widow and these can be viewed better when the banknote is held against light.
5. Optically Variable Ink (OVI): The numeral 500 & 1000 on the Rs.  500 and Rs.  1000 banknotes are printed in Optically Variable Ink viz., a colour-shifting ink. The colour of these numerals appears green when the banknotes are held flat but would change to blue when the banknotes are held at an angle.
6. Fluorescence: The number panels of the banknotes are printed in fluorescent ink. The banknotes also have dual coloured optical fibers. Both can be seen when the banknotes are exposed to ultra-violet lamp.
7. Latent Image: In the banknotes of Rs.  20 and above, the vertical band next to the (right side) Mahatma Gandhi’s portrait contains a latent image, showing the denominational value 20, 50, 100, 500 or 1000 as the case may be. The value can be seen only when the banknote is held horizontally and light allowed to fall on it at 45°; otherwise this feature appears only as a vertical band.
8. Micro letterings: This feature appears between the vertical band and Mahatma Gandhi portrait. It contains the word ‘RBI’ in Rs.  10. Notes of Rs.  20 and above also contain the denominational value of the banknotes. This feature can be seen better under a magnifying glass.

How can one distinguish the MG series-2005 banknotes?

In addition to the security features listed above, the MG series -2005 banknotes have the year of printing on the reverse of the banknotes which is not present in the pre-2005 series.

What is the need for printing different series of banknotes?

Central banks the world over change the design of their banknotes and introduce new security features primarily to make counterfeiting difficult and to stay ahead of counterfeiters. India also follows the same policy.

E) Current Issues

Why are Rs.  1, Rs.  2, Rs.  5 banknotes not being printed?

Even though volume-wise, the share of such small denomination banknotes in the total banknotes in circulation was high, in value terms they constituted a very small percentage with average life of less than one year. The cost of printing and servicing these banknotes being not commensurate with their life, printing of these banknotes was discontinued and these denominations were coinised. However, Rs.  5 banknotes were re-introduced in 2001 to bridge the gap between demand and supply of coins in this denomination. The printing of  Rs.  5 banknotes has been discontinued from the year 2005.

Has Reserve Bank of India considered producing a plastic banknote?

The Reserve Bank, in consultation with Government of India, has decided to introduce one billion pieces of Rs.  10 banknotes on plastic substrate on trial basis.

How to check whether a note is genuine or not?

A forged note can be identified on the basis of the features which are present in a genuine Indian currency note. These features are easily identifiable by seeing, touching and tilting the note. It is advisable not to rely on just one security feature as no counterfeit note can normally be expected to successfully copy all of the security features included in notes. To read about how to check banknotes see the (link) http://www.rbi.org.in/scripts/ic_banknotes.aspx

Why has RBI decided to withdraw pre-2005 series banknotes?

Reserve Bank of India decided to withdraw from circulation all banknotes issued prior to 2005 as they have fewer security features as compared to banknotes printed after 2005. It is a standard international practice to withdraw old series notes. The RBI has already been withdrawing these banknotes in a routine manner through banks. It is estimated that the volume of such banknotes (pre-2005) in circulation is not significant enough to impact the general public in a large way and the members of public may exchange the pre-2005 series banknotes at bank branches at their convenience.