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Moneylife » Economy & Nation » Money & Banking » RBI ask banks to collect counterfeit notes and give credit to customers

RBI ask banks to collect counterfeit notes and give credit to customers

Moneylife Digital Team | 18/07/2013 04:04 PM | 

The Reserve Bank guidelines on counterfeit notes to banks indicates that banks will have to streamline their system in a manner that they have to bear the risk of receiving counterfeits rather than the common man who suffers a loss by unknowingly comes into possession of such notes

The Reserve Bank of India (RBI) has directed banks to collect counterfeit notes from depositors, mark them appropriately and also give credit to the customer for value of notes submitted.

“Detection of counterfeit notes, at banks, should be at the back office or currency chest only,” the RBI said in a circular issued on 27 June 2013 . “Banknotes when tendered over the counters may be checked for arithmetical accuracy and other deficiencies like whether there are mutilated notes, and appropriate credit passed on to the depositor or account or value in exchange given,” it added.

The RBI has further said that banks, which detect and deposit such counterfeit currency, would be compensated to a small extent. In the circular the central bank said, “It has been decided to compensate the banks 25% of the loss incurred in respect of counterfeit notes of Rs100 and above detected by them and reported to RBI and Police authorities.” This means that banks will not be absolved of the duty to check for counterfeits, but would not be the losers when a small number of fakes get past them.  

The problem of counterfeit notes has been escalating over the years. Recently, fake Indian currency, worth Rs37 lakh from a Chinese source was detected at a Delhi restaurant. In another recent case, the National Investigation Agency (NIA) has revealed clear link between Pakistan and Jammu and Kashmir-based terror outfits pooling their resources to circulate fake Indian currency and using it to fund jihadi activities in India, says a report from India Today.

According to RBI, reporting and detection of counterfeit notes has not improved on its expected lines. RBI said although 90% of the currency chests are with the public sector banks, they account for reporting of a mere 10% of counterfeit notes, while private sector banks with less than 10% of currency chests are reporting 90% of such cases.

The central bank also warned that it would penalize banks that do not report counterfeit notes in its branch or currency chest. Banks would be penalized if found holding counterfeit notes in its branch or currency chest without reporting it to RBI or Police, during an inspection by the RBI. “It will be construed as willful involvement of the bank concerned in circulating counterfeit notes, and appropriate penalty strict regulatory measures against the bank including stringent disciplinary action will be imposed by RBI,” the circular said.

Here are the RBI’s guidelines for detection of counterfeit notes to banks…

1)     The process of detection of counterfeit notes should be carried out at back office or currency chest only. Banks can check arithmetical accuracy and other deficiencies like mutilated notes at counters and passed on appropriate credit to the depositor/account or value in exchange given.

2)      Thereafter the notes should be passed over to the back office or currency chest, as the case may be, for detailed verification and authentication through machines.

3)      The notes categorized as suspect during machine processing should be subjected to manual verification for checking their authenticity.

4)     The notes identified as counterfeit should be kept separately with proper impounding stamp in the prescribed format. Details of each impounded note should be recorded under authentication in a separate register.

5)     There will not be any requirement to issue acknowledgement to the tenderer. 

6)     In the cases of detection of up to four pieces of counterfeit notes, in a single transaction, consolidated monthly statement should be sent to the Nodal Police Station through the Nodal Officer of the bank. In case of detection of five or more pieces, FIR in the prescribed format should be lodged.

7)     Banks should monitor the patterns or trends of such detection and suspicious trends or patterns should be brought to the notice of RBI or Police authorities immediately. 

8)     The reporting procedure to the Regional Offices of RBI in the prescribed format will remain unchanged.

It also observed that despite the measures and after rationalizing the procedure of filing first information reports (FIRs), the detection and subsequent reporting of counterfeit notes by banks continue to be inadequate. This has serious repercussions in that the Reserve Bank is not in a position to assess the number of counterfeit notes in circulation and its ramifications for the economy.

In past we saw many cases of counterfeiting of currencies, but in India it’s not as big which affects the economy as a whole. Involvement of Pakistan ISI and Counterfeit Currency boosted from Bangladesh borders may spread many Counterfeit Currency across the country but RBI also take initiatives to protect it, RBI launched website to explain detection of fake currency. As Prevention is always better than cure to prevent yourself be aware and alert! Still if you stuck with few counterfeit notes, make sure that you deposit it in your bank!

Reported by Vishrut Patel


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Gaurav Goel

Gaurav Goel 5 months ago

Sorry to say but private banks like ICICI Bank is not following properly the master circular issued by RBI. ICICI bank is doing only forfeiting the counterfeit note but not passing the credit to the tenderer or depositor who has no fault. No body (banker) ready to accept in that bank that how a common man can verify the bank note prior to take that note at cash counter at bank. After reaching at bank, Bank staff treat with him or her like he is only absolute defaulter in that case & rather to help they misguide him or her by fraudulent statement that holder will bear the loss only. Whereas holding the fake note is not the mistake of him or her only but this is the mistake of whole banking system when such fake note is received from ATM of bank. Can any body told me what is solution available with that person on whose such loss is imposed by that bank.

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gaurav 1 year ago

icici bank stil issuing acknowledgement slip to the tenderer
whhere i can lodge my complain

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Vipin Goel

Vipin Goel 1 year ago

If bank not give credit to depositor then please advise for next step... Need help in this ... today i deposit 3 lakh Rs in bank and 2 of 1000 Notes are getting fake but bank not gives me credit for this..

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DEEPAK DANG 1 year ago

In case RBI has issued directives "The process of detection of counterfeit notes should be carried out at back office or currency chest only. Banks can check arithmetical accuracy and other deficiencies like mutilated notes at counters and passed on appropriate credit to the depositor/account or value in exchange given...."
So, any bank attached to chest can deposit cash, along with counterfeit notes & Bank having chest will bear the loss. It is a Law & Order problem, hence 100% loss must be borne by GOVT.

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N Bhatia

N Bhatia 2 years ago

I think RBI has got grossly inconsiderate towards Banks here, if they would only be compensated for 25% of the fakes so caught, which essentially means that 75% of the losses would be borne by Banks themselves. Apparently, private banks, which are doing a good job of detecting such counterfeit currencies at the front end tellers itself, are the ones who would probably be impacted more due to this directive. In my opinion, it amounts to reprimanding of the efficient lot for their good work!!???
Moreover, most of these Private Banks immediately Educate the common person, who may still be unaware, as soon as first such counterfeit is detected in their cash deposits (even the person getting impacted would have vested interest to ensure (s)he doesn't repeats her/his mistakes).
By offering them credits for counterfeits, RBI is absolving merchants/ businesses all across from their responsibility of checking fakes at their end, and /or undertake other diligence measures like seeking ID proof for large cash payments when in doubt.
Only request to RBI is to refrain themselves of passing such directives where contradictory actions could be instigated on the part of Banks.

N Bhatia.

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