The Reserve Bank of India has issued a new Master Direction on Note Sorting Machines (NSMs), consolidating all existing guidelines into a single reference document for banks. This Master Direction on Note Sorting Machines, dated October 2, 2026, replaces five earlier circulars issued between 2009 and 2025. All banks across India must now follow these updated instructions.
Key Details of the Note Sorting Machine Guidelines
The direction sets clear standards for how NSMs must authenticate and assess the fitness of currency notes. Authenticity checking is mandatory before any fitness sorting begins. A note qualifies as “fit” only if it is genuine, clean enough for its denomination to be identified, and free from physical defects. Additionally, notes belonging to phased-out series must be sorted as unfit, regardless of their physical condition.
Fitness sorting covers ten specific parameters: soiling, limpness, dog-ears, tears, holes, stains, graffiti, crumples or folds, decolouration, and repairs. For example, a note with a hole exceeding 8 mm² must be classified as unfit. Similarly, repaired notes using tape, glue, or paper covering more than 100 mm² are to be rejected. These thresholds are clearly defined to ensure consistent machine performance across all banks.
Mutilated, imperfect, mismatched, and built-up notes must be classified as suspect or reject. Banks must then subject these notes to manual inspection to check for wrongdoing.
BIS Certification and Compliance Deadlines
The Bureau of Indian Standards published NSM standards under IS 18663:2024 in the Gazette of India on March 19, 2024. Therefore, all future NSM procurement by banks must be BIS certified. Banks can find the list of approved models on the BIS and MANAK online portals.
NSM models that manufacturers have discontinued must be phased out by June 30, 2027. Banks that fail to meet this deadline will face penalties under RBI’s Master Direction on currency distribution incentives and penal provisions. Meanwhile, banks must also test and recalibrate their machines every quarter and maintain signed certificates as records.
What This Means for Customers
These updated Note Sorting Machine guidelines help ensure that only clean, genuine currency notes re-enter circulation. As a result, customers can expect better quality notes from bank counters and ATMs. However, damaged or suspicious notes will be removed from circulation more consistently. This move strengthens the overall integrity of India’s currency management system.
Source: RBI Notifications
