Torn, burnt, or rat-eaten: how to exchange damaged notes in Nepal, and what NRB refuses

A reader's grandmother kept Rs 68,000 in a steel trunk under the bed, wrapped in a shawl. When the family opened it before Dashain, insects had been there first. Perhaps a third of the notes had holes; two Rs 1,000 notes were in fragments.

The family assumed the money was gone and nearly threw it out. Most of it wasn't gone. Nepal has a clear, free, statutory process for exchanging damaged notes, and the test that decides each note's fate is a single question: does more than half of it survive?

The rule is binary: more than half, or nothing

Nepal's damaged-note rule fits in one sentence. Section 57(2) of the NRB Act lets the central bank refuse a note whose design is deleted, torn, or defaced, or where "more than fifty percent of its portion has been destroyed." Flip that around and you get the working rule: keep more than half the note, keep the serial number readable, and you get the full face value.

NRB's own FAQ lists what gets refused: notes where the two halves carry different serial numbers, altered notes, notes with arbitrary writing, notes that pose a double-exchange risk, notes whose denomination and full serial cannot be verified, and notes with less than 50% remaining.

One thing worth clearing up, because Google results keep serving it to Nepali readers: India's rules are not Nepal's rules. The RBI runs a graded system where a mutilated Indian note pays full value above roughly 80% of its area and half value between 40% and 80%. Nepal has no half-value tier at all. If a Nepali counter offered you "half" for a badly torn note, that would have no basis in the NRB Act. Here the outcome is all or nothing.

Condition of the note	What you get
Torn but more than half survives, serial readable	Full face value
Torn, taped back together, same serial on both pieces	Full face value
Two halves with different serial numbers	Refused
Less than half the note remaining	Nothing
Serial number or denomination unverifiable	Refused
Deliberate writing, alteration, or defacement	Refused

The refusal isn't always final either. If a bank turns your note down and you think it's wrong, NRB's FAQ says you can appeal to the designated appeal-hearing authority within 35 days.

What counts as a jhutro note

The exchangeable category is wider than most people assume. NRB's definition of an unfit (झुत्रो) note covers notes that are torn, decayed, rotted, burnt, gone limp, insect- or worm-eaten, water-soaked with faded print, or discolored. All of these are exchangeable, subject to the 50% test above.

So the trunk money from the opening is mostly recoverable. An insect-eaten Rs 1,000 note with holes through it still passes if more than half the paper survives and the serial reads. The fragments are the losses: any note reduced to less than half its body is gone, and no certificate revives it.

Two categories are permanently out, whatever their condition:

• Suspected counterfeits. Under Section 57(4) of the Act, counterfeit or altered notes are forfeited without compensation, and NRB's guidance is to hand suspected fakes to the nearest NRB office or police station. The quick genuine-note checks NRB lists: the rhododendron watermark, the lettered security thread, and ink that doesn't run in water.
• Deliberately defaced notes. Writing slogans, crossing out, or burning notes on purpose is an offence; NRB's FAQ puts the penalty at confiscation of the note plus up to three months' imprisonment and a Rs 5,000 fine. A scribbled-on note also sits on the refused-exchange list, so the marker pen can quietly destroy the note's value even when no case is ever filed.

Where to actually go

Per NRB's FAQ on exchange locations, three kinds of counters exchange jhutro notes:

Counter	Where
NRB Currency Management Department	Central office, Kathmandu
NRB province offices	All provinces
Commercial banks operating a note depot (नोटकोष)	79 depots nationwide

The depot network is what makes this practical outside the capital. NRB runs 8 note depots itself, Rastriya Banijya Bank operates 45, and Nepal Bank Ltd another 26, covering districts across the country. If you are in a district headquarters, the nearest RBB or Nepal Bank branch is usually the counter to try first.

NRB's own public counter keeps banking-style hours: Sunday to Thursday 10:00 to 16:00 (closing an hour earlier, at 15:00, from Kartik 16 to Magh 15), and Friday 10:00 to 12:00. The same counter sells commemorative coins and gold asarfi, if you were looking for an excuse to visit.

The exchange is free by law. Section 56 of the NRB Act obliges the Bank to swap legal-tender notes and coins "without any fee or charge," in the same or different denominations of equal value. Nothing in the process should cost you a rupee.

One gap worth knowing: NRB publishes no per-day or per-person exchange limit for ordinary counter exchange, and no published document lists the exact ID required for a routine swap. Carry citizenship or another ID anyway; for anything beyond a handful of notes, expect the counter to ask who you are.

The hard cases: brittle, burnt, and bulk

Ordinary torn notes are an over-the-counter transaction. Three situations need more.

Notes too fragile to handle. For notes so decayed they are hard to count or no longer whole, NRB's procedure is oddly artisanal: paste a piece of paper the size of a full note of the same denomination onto the back of each damaged note, then present them at the exchanging bank. The backing sheet holds the fragments in one countable unit. Do this at home, gently, before the trip.

Fire and disaster damage. Notes burnt in a house fire, soaked in a flood, or buried in a landslide can't just be presented cold. NRB requires an application supported by a certified proof (निस्सा) and a muchulka from the relevant police office, local body, or a legally authorized official. Report the fire or flood when it happens and get the loss recorded; the certificate you collect that week is what turns ash-edged notes back into money later.

Bulk burnt notes, post-2025. After the September 2025 protests, NRB directed banks not to reimburse burnt or badly damaged notes in bulk without a recommendation letter from the police or local administration, an anti-money-laundering measure aimed at cash of unexplained origin. Small quantities are exempt. If a fire took a business float or a family's savings, the paperwork trail from the police report is no longer optional.

Why your bank keeps handing you crisp notes

The counter that exchanges your jhutro note is one end of a pipeline. NRB's clean-note rules require banks to sort every bundle: fit notes go back into circulation under a white slip with the counting institution's name and stamp, unfit notes go under a red slip straight to NRB for destruction. Since 2020, banks have been barred from re-circulating unfit notes at all, with notes triaged into ATM-fit, counter-fit, and unfit.

The scale of the churn explains why NRB cares. Per 2021 reporting quoting NRB officials, the central bank destroys old notes worth roughly Rs 40 to 50 billion every year and prints Rs 50 to 60 billion in new ones, at a printing bill of around Rs 400 million. Printing a Rs 100 note costs about Rs 2.99; a Rs 1,000 note about Rs 3.37. And 15 to 20 percent of new notes become unusable within four months of leaving the vault, which is a national indictment of how we fold money into trouser pockets.

That churn has consequences you have already met. In Dashain 2081, NRB stopped its traditional fresh-note exchange entirely, distributing only clean already-circulating notes, because exchanged notes were flooding back into vaults at two to three times the rate new ones went out. NRB's note-care advice reads like a list of everything we all do: don't fold notes into pockets, don't write on them, don't crease, stitch, or paste them.

There's a personal-finance lesson hiding in the trunk money too. Cash stored at home earns nothing, loses 2 to 3 percent a year to inflation, and, as the grandmother discovered, can be physically eaten. Money beyond a small emergency float belongs in a savings account you chose deliberately, where the cash part of your emergency fund stays liquid without feeding insects. Documents and valuables that must exist on paper do better in a bank locker than a steel trunk. Even a forgotten account beats a forgotten trunk; a dormant account is recoverable decades later, while a sub-half note is not.

What you actually need to know

1. More than half the note, full value; less, nothing. The NRB Act's 50% rule is binary, and the serial number must be readable. Ignore the graded half-refund tables in Indian search results; they don't apply in Nepal.
2. The exchange is free and closer than you think. NRB offices plus 79 note depots through Rastriya Banijya Bank and Nepal Bank handle jhutro notes at no charge. For brittle notes, paste a note-sized paper backing on each before you go.
3. Fire damage needs paper before money. A police or local-body certificate and muchulka are what make burnt cash exchangeable, and since late 2025, bulk burnt notes without a recommendation letter get refused outright. Report the loss first, exchange second.

If NRB or a note-depot bank refused a note you think passes the 50% test, or you're staring at a trunk of doubtful cash and want a second opinion before the trip, email parjanya57@gmail.com with a photo. Real cases help future readers.

This post is part of the Nepal Money Basics guide — the save-the-gap section.