Soiled note disposal by RBI falls sharply in FY26 due to machine upgrades

The central bank disposed of 17 billion soiled and mutilated banknotes in FY26, down from 22.9 billion a year earlier, as replacement of shredding systems disrupted processing operations

The number of soiled banknotes disposed of by the Reserve Bank of India (RBI) dropped sharply in 2025-26 because the shredding of such notes was interrupted due to the replacement of machines.

 

According to latest data, the central bank disposed soiled or mutilated notes of 17 billion pieces in FY26 as compared to 23.9 billion pieces in the previous financial year. 

This was mainly due to the replacement of Shredding and Briquetting Systems (SBS), which interrupted the disposal of soiled banknotes. Sources said the replacement and installation of such machines usually take four to five months. During this period, the operation of SBS and Currency Verification and Processing Systems (CVPS) machines remained suspended.

 

The RBI’s annual report noted that the upgradation of banknote-processing infrastructure at the Reserve Bank’s Issue Offices continued with the installation of new SBS machines.

 

“The disposal of soiled banknotes during 2025-26 has been lower than that of the previous year on account of transient interruptions arising from the replacement of Shredding and Briquetting Systems (SBS) at Issue Offices of the Reserve Bank,” the annual report for FY26 said.

 

The augmentation of cash-processing infrastructure through the procurement of new Currency Verification and Processing Systems (CVPS) is also underway.

 

So far as the exchange of soiled or mutilated notes is concerned, RBI norms mandate that all bank branches can accept and exchange soiled banknotes for full value. Banks should extend the facility of exchanging soiled or mutilated notes to non-customers as well.