Bangladesh Bank Issues New Policy for Torn, Damaged, and Defective Banknotes

Customers can now receive the full value of a banknote if more than 90% of it remains intact. Any branch of any bank is required to exchange such notes immediately. However, if a note has 90% or less of its original portion intact, the value cannot be paid on the spot. In such cases, the note must be submitted at a bank branch, and, subject to Bangladesh Bank’s approval, the exchange value will be returned within a maximum of eight weeks.

Bangladesh Bank has issued this new policy under its “Banknote Refund Regulations” to manage uncirculatable, torn, damaged, or defective notes. The updated regulations, announced on October 9, 2025, were officially implemented last Monday. The move follows Bangladesh Bank’s recent discontinuation of direct cash exchange services, emphasizing that all banks must now provide note exchange services at their branches.

Exchange Services Available at All Branches

Under the new rules, every branch of every bank must provide exchange services for uncirculatable, torn, damaged, or defective notes. Notes whose value cannot be paid immediately must be submitted to Bangladesh Bank via the branch, which will process the application. All branches have been instructed to ensure this service, and failure to comply may result in action against the concerned bank.

The circular categorizes notes into five types based on usability and condition:

1. Circulatable notes

2. Uncirculatable notes

3. Torn, damaged, or defective notes

4. Claimable notes

5. Burnt notes

Circulatable notes remain in general circulation, while uncirculatable and torn, damaged, or defective notes can be exchanged at any bank branch.

Definition of Torn or Damaged Notes

Notes with more than 90% of their original portion intact are eligible for immediate full-value exchange. Notes with 90% or less remaining, or excessively dirty notes, are classified as “claimable.” Banks cannot provide the value for these notes directly; Bangladesh Bank will review applications and determine the exchange value, which must be communicated to the bank within eight weeks.

For burnt notes, banks cannot provide any exchange value. Customers must submit such notes directly to any Bangladesh Bank branch, which will verify and decide on the value. The circular also mandates that every branch display a notice confirming that services for exchanging torn, damaged, or defective notes, as well as claimable notes, are available.

Any attempt to present counterfeit notes or patched-together note parts will result in legal action under applicable laws.