If you get mutilated notes from ATM, you can replace them with the same bank from whose ATM these notes have been withdrawn. RBI has also issued a notification to change the note.
ATM damaged note: Many times it happens that torn notes come while withdrawing cash from ATM. These torn notes are of no use. You cannot shop with them, nor can you pay anyone. Since the torn notes have come out from the ATM, then we do not even have the option to exchange them.
If it has happened to you that you have got mutilated notes in your hand while withdrawing money from ATM, then there is no need to worry. You can change these. You can exchange these mutilated notes in the bank branch from whose ATM these notes are to be withdrawn.
For this there are some important things that have to be taken care of. You have to go to the branch of the bank having ATM and tell the date, time and place of withdrawing money from the ATM from where you had withdrawn the money. While withdrawing money, the slip from the ATM will also have to be deposited in the bank. If you have not taken out the slip or have not got it, then the message on the mobile phone will have to be shown.
By doing this you can exchange mutilated notes from ATMs. Reserve Bank of India has also issued a notification to change such notes.
What the rule says (RBI Rule for damaged note)
RBI says that notes are thoroughly checked by machines before loading notes in ATMs. That is why dirty and mutilated notes do not come out of ATMs. If for some reason this has happened to a person, then he can go to the bank with the ATM and change the note.
No bank can refuse to exchange mutilated notes from ATMs. Also, despite this, if the banks violate the rules, then action can be taken against the bank employees.
RBI says that only the bank is responsible for the defective and counterfeit notes coming out of ATMs. Not the agency that put the money in the ATM. If there is any defect in the note, then it should be investigated by the bank employee itself.
State Bank of India has even made a complaint cell for this. You can lodge a complaint of mutilated notes at crcf.sbi.co.in/ccf/. This link is for State Bank of India ATM.