Abstract: In the paper, a system is proposed which is used to identify the old and soiled Indian paper currency notes. When the new currency notes are introduced and put into circulation, they get passed from person to person. As the time passes by, these notes gets soiled, dirtier, and also get wrinkled. Identification and recognition of such notes inside the automated teller machines (ATMs) becomes difficult. Thus in the paper, a system is developed to handle such soiled, old and dirty Indian paper currency notes. The system works on three denominations of Indian paper currency which are 50, 200 and 500 Indian paper currency.