Citizens' Issues
The very serious business of funny money-I

Welcome to the real convoluted world of counterfeit currency in India, where the victim is prosecuted, the fence eats the crop, and the criminals walk free. This is the first part of a three-part series

So you thought that just because you got your currency notes from across a bank teller's counter or an ATM, they were guaranteed to be the genuine item?
Just one of many episodes - over Rs4 crore worth of fake currency in an assortment of 500 and 1,000 rupee denominations, running into 76,108 currency notes, would take around 80 shoe-boxes to fill. That is about 8-10 large steel trunks of the sort used by banks to move cash around. One could probably understand if it was moving from one hoodlum to another, or a large city, or even in a medium or small town. But as part of an RBI controlled cash chest at an SBI branch in an extremely small town in Uttar Pradesh that does not even have a railway station? Domariganj, close to the Indo-Nepal border, probably doesn't transact in lakhs per day, but hey, that didn't prevent the fine people at SBI from replacing Rs4 crore worth of genuine money with some funny money made elsewhere - same series, everything.
This episode a couple of years ago was sought to be hushed up by both RBI and SBI. However, the grapevine is supreme, and there is no smoke without fire - so the buzz is that this currency was destined, via private transporters, to the business of refilling ATM cartridges - which as of now is also privatised, and as per information, is often still not required to provide currency note checking facilities. Till March 2011, and that also only where branches have daily cash transactions exceeding Rs50 lakh, you will continue to get currency notes that may not have been "duly checked for authenticity/genuineness and fitness by machines."
(For more, see:

Were those who were behind this crime punished? We don't know, but if you had found yourself with even one of those currency notes, and then tried to go back to SBI to argue about it, well, hey, they would have filed an FIR with the local police. Against you. That's for sure. How about that for a neat system to make sure that any fake notes in circulation will not be complained about?
Welcome to the real convoluted world of counterfeit currency in India, where the victim is prosecuted, the fence eats the crop, and the criminals walk free. Matter of fact, they rename themselves the "cash management industry", are closely allied to the "payment processing industry", and will make sure the system will lock you up if you try to complain about them. (Moneylife had earlier reported about the issue. Read more and! )
Seafarers worldwide are natural and favourite targets for fake and counterfeit currency, such is the nature of the job. Earning in one currency, getting paid in another, spending in a third and getting change back in a fourth, is par for the course. As a result, they acquire a reasonably sharp sixth sense about the subject, and pick up enough from the grapevine too.
For example, in the '70s, ports in Taiwan, the Philippines and the rest of the Far East, including and especially Singapore before it went sterile and sanitised, were areas of high caution. The regular SCI-operated passenger ship between Singapore, Malaysia and (erstwhile) Madras, called the MV Chidambaram, was especially famous as a regular carrier of fake currency, with the way-port of Nagapattinam a known transit point. When the Suez Canal re-opened, it was awash with fake German currency, many were the unwary who were saddled with close to worthless East German marks at market rates matching the West German ones. And Aden, for some reason, was one location where bundles of well-worn and used fake Indian currency could be obtained in the local souks - much of this currency was 'used', because it had been used as legal tender in the Arab countries and some of the African countries, in the past. Till the '70s.
Likewise, it was always rumoured that the areas around Kolhapur and Belgaum, especially Khanapur, were centres of excellence as far as printing anything counterfeit was concerned. This probably started off as a mutually damaging effort on the part of the Portuguese in Goa versus the British in India before and during World War II and everybody else after that, till the more famous stamp paper scandal of the recent past.
Your correspondent was on a cargo ship trading worldwide, which called at a small port on the West Coast of the US, mid-70s. We went ashore to the local market and bars one evening with US currency that was paid to us in Singapore, some of which was found to be counterfeit, and then tracked back to us. As our ship was still in port, we ended up being questioned very closely indeed - first by the local police, and subsequently Treasury agents from the US Secret Service.
That was the first time in my life when I learnt how countries like the US approach the issue of the sanctity of their currency. It is at a level which is on par if not higher than the safety of the life of their President as well as the defence of their country. However, the complete investigation as far as we or our ship was concerned was not to blame us or find us guilty, but to co-opt our assistance in trying to trace the source for this currency. The investigators, and they were really tough and mean looking big guys, took immense pain and effort to let all of us know that we or our ship were not going to be put to any trouble - but at the same time, they certainly wanted to know as much as they could, so would we please co-operate?
And pass the beer, hey, we were all good guys on the same side.
Here is the link ( to the relevant RBI circular instructing banks and other entities in India on what to do in case their customers or they detect fake or counterfeit currency in the course of their daily work. Please do not miss the wording of the FIR, which immediately places the customer at a disadvantaged position - even if he or she had just been given the same counterfeit currency by the same bank!
Moneylife awaits responses from RBI on the subject.

(The second part of this series will appear tomorrow).



vikas murkute

7 years ago

hi iam vikas mony foundation in association with reliance mutual fund,organised the big ideas and smart and monay.thanks?

P K Biswas

7 years ago

Dear Mr. Malik
In case you intend to follow up the matter and need information for that purpose, I shall provide you the same to the best of my knowledge. I am sure you do realise that printing of banknotes is a huge business and there are too many interested parties. So you need to draft your article carefully.
Best wishes.
P. K. Biswas


V malik

In Reply to P K Biswas 7 years ago

Dear PK Biswas, most certainly I would be grateful for information, and thank you for the same. You could post it c/o Moneylife, or eMail me c/o Moneylife or directly at veereshmalik at gmail dot com.

Thank you,



7 years ago

Veeresh Sir, I've been at the receiving end. At BOB, CP Branch, where I had gone to deposit some money in my Medical College Alumni A\C. The Cashier there told have two choices.
(A) I burn this Rs 500 note in front of you and you hand-over another note to me OR
(B) I call the Police and lodge an FIR naming you as a culprit.
Guess what choice I took?


V Malik

In Reply to JSBatra 7 years ago

Well, hopefully now you know better, and will be more prepared to take a correct stand next time. Thank you for writing in.


7 years ago

Great article. Very informative and true to the scenario.

One question: Do the banks have, or not, ANY mechanism to know whether the currency notes have come out of their ATM machine?

2 Scenarios:

1. If I get fake currency notes out of a bank ATM, how can I prove these are from a particular ATM?

2. If I, suppose, take out 5K and the ATM gives me 4K (or God forbid, even less) then how can I prove the deficit to a bank executive?

In short, do they have a serial-number wise account of the notes deposited from the chest to the ATM? Or can I rely on their EOD accounting cycle? Or is it just their word against mine?


V Malik

In Reply to varun 7 years ago

Thank you Varun, for your comments.

a) The currency notes that come out a bank's ATM have in India typically been stuffed into the cartridges probably by a casual employee of an employee of a sub-vendor of a vendor of a contractor. The technology to ensure that counterfeit notes do not reach customers from an ATM exist at point of supplying the currency, at the point of stuffing the cartridge, at the point of installing the cartridge into the ATM and at the point of dispensing the currency from the ATM. That counterfeit currency reaches customers despite all these checks and balances can only spell one thing.

b) For the counterfeit currency from ATM scenario, an answer is being provided in the next part.

c) For short supply of currency, please complain directly to RBI on their website - or write to MoneyLife with full details. Complaining to the bank is like going back to the thief!!


7 years ago

Very nice article --- sharp delivery, depth of substance . It seems today in this country, we all need the street smartness of a seaman -- to walk the mean streets "neither afraid, nor corruptible".( GK Chesterton)


V Malik

In Reply to pradyot 7 years ago

Believe me, I agree with you, Pradyot. Researching on this subject itself teaches one so much, and needs a lot of guts, too.

Sudhir Jatar

7 years ago

Very revealing. I am not surprised if our Queen is not behind this lax manner of treating fake currency. In any case, our Hon'ble FM used to defend known smugglers before he adorned the high offices of HM and FM.
Looking forward to the other two articles.


V Malik

In Reply to Sudhir Jatar 7 years ago

Thank you, Sudhir, for your comments. I just tell it like I see it!! But yes, sure, the counterfeit currency "business" is certainly well organised.


7 years ago






V Malik

In Reply to j 7 years ago

Thank you, J, for your comments - read you LOUD and clear. Public is the sovereign, and is certainly going to be the mirror, especially for laws which were designed to keep natives down.

Niranjan Bangera

7 years ago

Hi Mr.Malik, Being a seafarer (ex) myself, this brought back old memories. I have been reading your articles occasionally.

Keep up the good work




V Malik

In Reply to Niranjan Bangera 7 years ago

Thank you Niranjan, for your kind words, and yes - I too recall how as seafarers "funny money" was almost a regular part of existence onboard. Please stand bye for the next two segments here . . .

P K Biswas

7 years ago

As former ED of RBI and still being interested in ensuring genuine banknotes are in circulation I appreciate the article and wish the article is circulated widely. The article, however, touches only the tip of the iceberg and the malaise (or greed) is deep rooted and will aggravate further with the decision to give INR a symbol of its own.


V Malik

In Reply to P K Biswas 7 years ago

Thank you for your kind words, Mr. PK Biswas, and I do hope that you also appreciate the courage it takes for the editors of MoneyLife to publish this. Yes, I am aware it just touches the tip of the iceberg, and am working on placing more here. All help appreciated. There are others who are placing themselves at risk, I am just the writer, so grateful to all the silent people too.


7 years ago

Excellent article. You have brought a very valid point to the people. Let's see what RBI has to say.


V Malik

In Reply to Prakash 7 years ago

Thank you for your comment, Prakash. We shall need more people to stand up and ask questions of RBI.

The deeper risk is when RBI and others in the fiscal system in India take on vendors and suppliers whose beneficiary details are unknown.

FMC directs SEs to limit stake in commexes to 5% by 31st December

The sudden move by the regulator FMC is aimed at curtailing the National Stock Exchange's "undue" influence on the management of the NCDEX board

The Forward Markets Commission's (FMC) move to cap the shareholding by a stock exchange in any national-level commodity bourse at 5% is seen as an attempt to ward off any potential conflict of interests between the two, reports PTI.

A senior official in the consumer affairs ministry, under which the FMC functions, said: "The shareholding norms for stock exchanges have been tightened to reduce their influence in the functioning of the commodity exchanges."

Sources said the sudden move by the regulator FMC is aimed at curtailing the National Stock Exchange's (NSE) "undue" influence on the management of the National Commodity and Derivatives Exchange (NCDEX) board.

According to the modified shareholding norms released by the FMC for national commodity exchanges (NCE) which have completed five years of operation, "The shareholding by any single stock exchange shall not be more than 5% of the subscribed and paid-up equity capital of the NCE."

"No single stock exchange can become a strategic investor (and) the combined stake of all stock exchanges can maximum be at 10% in any NCE," the FMC said.

At present, NSE has a 15% stake in NCDEX, the country's second biggest commodity bourse. As a result of the new rules, it has to bring down its stake to 5% by 31st December 31.

The ministry official said: "Amendments were made to restrain NSE from having undue influence on the management of the NCDEX board, as the former may use the NCDEX platform to create unhealthy competition with rival bourses."

The move is an attempt to avoid conflict of interests between the stock exchange and commodity exchange, he added.

Already, there is a rivalry between NSE and Financial Technologies India Ltd (FTIL), the promoters of MCX-SX, in currency futures trade, the equity segment and others.

Mumbai-based NCDEX and MCX and Ahmedabad-based NMCE have completed five years of operations since commodity futures were reintroduced in 2003.

NCDEX corporate service head Ananda Kumar said, "At present, we have not taken any view on NSE. However, the board will soon take a call."

Besides stock exchanges, the FMC has clearly defined the shareholding norms for commodity bourses. It said that any single commodity exchange cannot hold more than 15% stake in a rival NCE. The combined stake of stock and commodity exchanges cannot exceed 20% in an NCE, it added.

The modified norms will be applicable to both existing as well as for new commodity exchanges.


Mis-selling: IRDA moots cancelling licence of agents

The insurance regulator has proposed cancelling the licence of an agent if 50% of the policies sold by him/her are not renewed annually.

With many life insurers not able to retain customers due to mis-selling, Insurance Regulatory and Development Authority (IRDA) has proposed that licence of an agent be cancelled if 50% of the policies sold by him/her are not renewed annually, reports PTI.

"Where the average annual persistency ratio is less than 50%, the agency licence would not be renewed," IRDA said in a draft.

Mis-selling refers to sale of a financial instrument without fully disclosing the pros and cons of it to an investor.

In its proposal on persistency of life policies, IRDA says the minimum first-year premium income to be procured by an agent will be Rs1,50,000 per annum and the minimum number of policies per agent shall be 20 per annum. In case an agent fails to meet one of these two conditions, he will have to achieve proportionately more in the other norm to make up for the shortfall, it added. It also does not want spouses and close relatives of employees of insurers as agents.

In the last five years, persistency in the life insurance business has been on the decline and IRDA has attributed this mainly to mis-selling. Persistency is the percentage of business retained without lapsing or being surrendered. "There are several causes for the decline in persistency that are linked to agents. The primary one is mis-selling," IRDA says.

The IRDA data show that over 50% policies of many life insurers could not be renewed in FY10. Aviva Life could not retain 50% of its business from existing customers from the 13th month onwards in 2009-10, while HDFC Standard Life, ING Vysya Life and Kotak Mahindra was below the half way mark from 37th month onwards in renewal of policies that year.

IRDA says if policyholders buy policies on the basis of good and proper advice, they would not normally give them up unless there are unforeseen circumstances. "But where a policy has been sold without proper advice, for instance on the actual cost or instalments to be paid, they may have no option but to cease or reduce the premium," IRDA says.

The insurance watchdog suggests that insurers would have to ensure that intermediaries are trained well to ensure proper servicing of policyholders. It also wants a part of an agent's first-year commission be withheld to be paid later on good persistency.

It says the corporate agents route, excluding banking medium, has shown the poorest persistency rates in the first three policy years. "This indicates a scope to improve the quality of sales. However, again, to observe stable trends we would need data of a few more years," it adds.

Another cause of lapse linked to agents is high attrition.

"Where agents are groomed to become professionals and build a long-term career, attrition will be less and persistency would certainly be better. It is necessary to have an environment where agents take their career seriously," says the paper.

IRDA has asked various stakeholders and general public to submit their comments on these proposals by 31st July.

It says these proposals would help protect the interests of policyholders. “Due to selective withdrawals, lapses, average mortality of remaining policyholders will make premiums insufficient to cover the risk," it said.




7 years ago

Irda Is going in right direction. Presntly large no of agents are selling by way of mis information ie. ulip is a short tem investment for 3 years. Thats why persistancy is below 50pc. But at the same time the norms should be Rs 150000 of premium or 20 policies to avoid mis selling to retain the licence. After all coustmer should not be cheated for any reason

rajkumar jain

7 years ago

case limit should be 12 instead 20 also premium must be regular 150000/- excludes single premium
second if agent is in more than5 years he should not be escaped from renewal commission which he procured in early days with hard labour

asim kr das

7 years ago

IRDA is taking step for individual
agents.But the corporate agents selling
insurance polices through the novic & untrained agents or by a policy in which every policy holder is being an agent as they introduce another person to buy an insurance policy for incentive offered by insurer or insurance copany. In fact, corporate agents enjoy enough scope for miss-sellng. what IRDA doing for them?

Raghavaiah Kurapati

7 years ago

So called mis selling is due to bank assurance where the customers are forced to buy policies because of facilities that are being sanctioned to them. One more thing is even big brother company is allowing its agents to send sms indicating 30-40% results and payment as low as 3 years contribution etc., which is violates IRDA guidelines - eg. contribute 10 k for 3 yrs and you will get automatically several lakhs at the end of 20th year - this type of posters are pasted on street walls by big brother company agents with company emblem on these papers. Companies should stop canvassing by saying scheme is going to be closed soon. In fact the closure of the scheme is better for investor in its new avatar to be released. Yearly new business premium of 150000 is ok but case count must be at 10 per annum and not 20. These conditions should not be applicable to agents after their 5 years of service, otherwise under the pretext companies will remove these agents and trail commissions will be at stake.

Abhishek Ratan

7 years ago

Well it is an appreciable initiative taken by IRDA but the Regulatory body have to understand this unless there is an effective ombudsman channel to resolve the issues this type of mistakes will happen always and it is not only the fault of the agent but also the agency manager or development oficer under whom the agent is because most of the times it is the internal staff of the insurance companies who backed the agents on procuring the business but as soon s the sales made they refuse even to answer the call f the client.

i hope this type of measures will be in the best interest of the general mass

Prof. Bajaj

7 years ago

Thank God !!

At last IRDA wakes up from sleep.

This is the same thing everyone was trying to tell IRDA that there has been a lot of mis-selling of insurance products happening due to high commissions. But IRDA was always turning a blind eye towards it.

Now that insurance companies are not getting business, it has started worrying them and IRDA.

We are listening!

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