The RBI on Friday asked banks to test their note sorting machines for accuracy and consistency every quarter to ensure currency notes conform to the prescribed parameters.
Following demonetisation in November 2016, the Reserve Bank issued new notes of Rs 200, Rs 500, and Rs 2000, besides releasing new series for other denominations.
In the backdrop of the introduction of the new series of banknotes, the Reserve Bank said note authentication and fitness sorting parameters have been reviewed and a revised set of guidelines have been issued for implementation.
In the circular on 'Note Sorting Machines - Authentication and Fitness Sorting Parameters', the RBI said a fit note is "a note that is genuine, sufficiently clean to allow its denomination to be readily ascertained and thus suitable for recycling".
An unfit note is the one that is not suitable for recycling because of its physical condition or belongs to a series that has been phased out by the Reserve Bank of India.
"A note must pass all the fitness parameters to be considered fit for recycling," the central bank said while prescribing the parameters.
The parameters, it said, provide the minimum standards for cash handling machines used by banks.
"Notes can only be recycled/reissued if they are evaluated as genuine and fit according to these parameters. An authenticity check is a prerequisite for fitness sorting," the RBI said.
The machines should be able to identify and segregate suspected counterfeits and notes which are unfit for circulation.
"Banks shall ensure that the Note Sorting machines are tested for accuracy and consistency on a quarterly basis and recalibrated, if required. A certificate (signed by Bank Officials) to this effect shall be maintained for records," the RBI said.
As a part of fitness sorting, notes with any visual or physical defects are to be sorted as unfit as per the criteria prescribed in the circular.
It also said 'suspect/reject notes' should be subjected to manual inspection for any wrongdoings.