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 third part of a three-part series
A few more anecdotes that illustrate how tortuous the system has become as far as counterfeit currency in the country is concerned.
1) A fairly senior news television producer, a person who knows enough people who matter, and whom bank managers defer to. This is what happened to him — last year, around October. I had to give some cash to a friend so I took out money from a bank-attached ATM, from ICICI Bank. He took the money and gave a couple of notes to his father-in-law, who is a real-estate guy. He immediately showed him that the notes were fake. They then took the notes around to some more trusted people dealing in cash on a daily basis and they all confirmed it. (I didn’t see them again). The notes are lost in the market now. (As, we were told, is the norm). I did go to two different ICICI Bank branches to complain but they all seemed clueless to what the procedure is, if any. One bank manager, who showed up promptly on hearing the news, told me to get the notes and said that he will burn them down as that is the normal procedure. But he said that there is no way I could prove that the notes are from the ICICI Bank ATM (or any ATM for that matter) so I might end up in trouble if I go to the cops. End of story.
The list goes on. Hospital cash counters have their own tales, as do people working at liquor shops, and everywhere, the response is the same — destroy or vanish the currency notes somehow — otherwise we will get into trouble. Liquor shop owners are even more droll — they claim they use the forged notes to take care of assorted overhead expenses, and justify it with a knowing look. And there is no dearth of anecdotes and evidence on how large sums of cash/currency seized in the course of raids is often found to contain sizeable numbers of forged or counterfeit currency notes.
What does the central bank have to say on the subject? The master circular mentioned in the previous article, and available here clearly spells out the RBI’s stance on the subject: http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=5828).
There are obviously a few major lacunae in this approach — first of all, the law as it stands in India does not define “ordinary people”. Next, the limit on the number (five) of forged currency notes is arbitrary. Finally, RBI in its wisdom, seeks to wash its hands of the matter by passing the blame completely on to the customer, or constituent, of the bank. Brilliant, pass the bay, and throw the baby out with the bathwater. Certainly makes the statistics look better. Something like the way police stations reduce the number of FIRs by simply not registering them!
However, what we do learn from this is that the matter has been escalated. But that must be cold comfort to those impacted.
So, this, however, still does not answer the basic question: what should you do if you find yourself saddled with counterfeit currency?
Important note number (1): You have for all practical purposes lost the value of the counterfeit currency in your possession. At least until the perpetuator is found. There is, as of now, no apparent way to claim damages. But you are an honest citizen, and want to try to do the correct thing?
There are two main streams:
1) Assuming you have drawn the currency from a bank (ATM or counter), and then you have figured out somehow that the currency is counterfeit, then in the first instance you would be wrongly advised to go back to the same bank. It is a bit like catching a thief and then begging him for justice. The bank’s position is explained above. They quote the law to scare us.
The law as it stands, is Section 39 of the CrPC and Section 489 of the IPC, reproduced here:
Section 39 (1) (xii) of the CrPC says: Public to give information of certain offences. (1) Every person, aware of the Commission of, or of the intention of any other person to commit, any offence punishable under any of the following sections of the Indian Penal Code (45 of 1860) . . . namely (xii) Sections 489A to 489E, both inclusive (that is to say, offences relating to currency notes and bank notes) . . . shall, in the absences of any reasonable excuse, the burden of proving which excuse shall lie upon the person so aware, forthwith give information to the nearest Magistrate or police officer of such Commission or intention.
Here is Section 489A to 489E:
489A. Counterfeiting currency-notes or bank-notes: Whoever counterfeits, or knowingly performs any part of the process of counterfeiting, any currency-note or bank-note, shall be punished with 152 [imprisonment for life], or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine. Explanation: For the purposes of this section and of sections 489B, 489C, 489D and 489E, the expression "bank-note" means a promissory note or engagement for the payment of money to bearer on demand issued by any person carrying on the business of banking in any part of the world, or issued by or under the authority of any State or Sovereign Power, and intended to be used as equivalent to, or as, a substitute for money.
489B. Using as genuine, forged or counterfeit currency-notes or bank- notes: Whoever sells to, or buys or receives from, any other person, or otherwise traffics in or uses as genuine, any forged or counterfeit currency-note or bank-note, knowing or having reason to believe the same to be forged or counterfeit, shall be punished with 152 [imprisonment for life], or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.
489C. Possession of forged or counterfeit currency-notes or bank-notes: Whoever has in his possession any forged or counterfeit currency-note or bank-note, knowing or having reason to believe the same to be forged or counterfeit and intending to use the same as genuine or that it may be used as genuine, shall be punished with imprisonment of either description for a term which may extend to seven years, or with fine, or with both.
489D. Making or possessing instruments or materials for forging or counterfeiting currency-notes or bank-notes: Whoever makes, or performs, any part of the process of making, or buys or sells or disposes of, or has in his possession, any machinery, instrument or material for the purpose of being used, or knowing or having reason to believe that it is intended to be used, for forging or counterfeiting any currency-note or bank-note, shall be punished with 152 [imprisonment for life], or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.
489E. Making or using documents resembling currency-notes or bank-notes: (1) Whoever makes, or causes to be made, or uses for any purpose whatsoever, or delivers to any person, any document purporting to be, or in any way resembling, or so nearly resembling as to be calculated to deceive any currency-note or bank-note shall be punished with fine which may extend to one hundred rupees. (2) If any person, whose name appears on a document the making of which is an offence under sub-section (1), refuses, without lawful excuse, to disclose to a police officer on being so required the name and address of the person by whom it was printed or otherwise made, he shall be punished with fine which may extend to two hundred rupees. (3) Where the name of any person appears on any document in respect of which any person is charged with an offence under sub-section (1) or on any other document used or distributed in connection with that document it may, until the contrary is proved, be presumed that person caused the document to be made.
The operative term here is: “knowing or having reason to believe the same to be forged or counterfeit”. Your correspondent took the effort of getting a lawyer, a CA, a retired policeman and a retired income-tax person to guide him, and this is the best they could come up with — and this is the difficult part — instead of going to a bank, you should head for a police station or a magistrate, with the counterfeit note duly cancelled and marked by you as “forged/counterfeit” so that there is no question of anybody suspecting you of misusing this currency, and lodge an FIR as a private citizen against the bank from whose ATM or teller you got this counterfeit currency. Take a digital photo of this cancelled currency note and place it in your records with a date and time, as well as a brief note on how you got the currency in the first instance, and give the whole lot to your lawyer or to some reliable people before you head for the police station or magistrate. Preferably, take a lawyer with you, but certainly cancel the currency note by writing ‘COUNTERFEIT’ on it in bold letters so that no entity can accuse you of having malafide intentions.
It will now have to be up to the investigative agencies to do what they need to, and you shall have to cooperate, but since you have marked the notes — you are clear.
The second scenario, where you are depositing cash in a bank, and some of it turns out to be counterfeit, is still without a solution, as of now. This will need co-operation and a change in attitude as well as approach from RBI as well as the finance ministry — which, as you can see above, is still awaited.
Moneylife is seized of this subject, which comes up regularly at many different forums and meetings, and shall keep readers in the loop. Till then, prevention is the best part of cure, and if the ATMs in your area are suspect, then use the teller — and get the bank to run the currency notes through their machines before accepting them.
The market has been in pause mode for two days. Will it spend more time consolidating before the next move?
The market witnessed a high degree of volatility today. The Sensex settled at 17,909, down 28 points (0.1%) and the Nifty ended the session at 5,378, down 7 points (0.1%). The indices traded range-bound in the morning session. The benchmarks witnessed a fall in the early afternoon session; however, the market recovered, taking cues from the European market, which staged a recovery after opening weak. Gains were pared towards the end of the session with the market ending in the red.
Asian stocks were down on Thursday, with mixed leads from Wall Street and data showing further cooling in the Chinese economy weighing on investors. China on Thursday reported a slowdown in second-quarter economic growth. Gross domestic product (GDP) grew 10.3% over the same period a year earlier, slowing from the 11.9% annual growth recorded in the first quarter. Key benchmark indices in China, Singapore, Hong Kong, Indonesia, Taiwan, Japan and South Korea were down by 0.1% to 1.1%.
US stocks ended flat on Wednesday, on the Federal Reserve's suggestion for the need for additional measures to combat a weakening economy and weak report on June retail sales. The Dow edged up 3.7 points (0.04%) to end at 10,366. The S&P 500 was down 0.02% to 1,095. The Nasdaq added 7.8 points (0.35%) to close at 2,249.8.
Back home, annual food inflation was up to 12.81% for the week ended 3rd July while fuel inflation was up 14.27%. In the previous week, food inflation was at 12.63% and fuel inflation was at 18.02%.
While vegetable prices fell by 5.70% year-on-year, costlier pulses and cereals kept food inflation higher. The overall inflation, as denoted by the wholesale price index (WPI) based inflation, was 10.55% in June.
Foreign institutional investors were net buyers of Rs569 crore in the equities segment on Wednesday. Domestic institutional investors were net sellers of Rs331 crore on the same day.
Vinati Organics (up 8.2%) has lined up major capital expenditure plans. The new products and expansions planned are expected to yield additional revenues of around Rs150 crore per year and the co-generation plant would entail significant cost savings to the tune of Rs8 crore per year. The total capex for the project is Rs120 crore and the company plans to fund the same through a combination of internal accruals, debt and equity.
L&T's (down 0.5%) two joint venture companies with Mitsubishi Heavy Industries and Mitsubishi Electric Corporation commenced production of turbine-generators and boilers at their new factories in Hazira, Surat. Each of these two factories is capable of producing 4,000MW of power-generating equipment annually. The company will be investing about Rs3,600 crore on the project.
Energy Development Company Ltd (down 0.1%) has received a letter of intent for supply of main generating equipment for one year from Bihar State Hydroelectric Power Corporation. The contract is for Rs4.96 crore.
Axis Bank (up 2.7%) posted an increase of 14% and 23% in revenue and operating profit respectively in the June quarter over the year-ago period.
Colgate Palmolive (India) (down 0.32%) posted 13% and 2% increase in sales and operating profit respectively in the June quarter over the year-ago period.
Neither ICICI Bank nor HDFC Bank, even though their equity is owned by foreigners, suffers from any handicap, because they are incorporated in India, noted DIPP secretary R P Singh
The government has assured private sector lenders ICICI Bank and HDFC Bank that they will not be discriminated against vis-à-vis PSU banks even as their status has been changed to foreign-owned Indian-controlled lenders, reports PTI.
"In my view, neither ICICI Bank nor HDFC Bank, even though their equity is owned by foreigners, suffers from any handicap, because they are incorporated in India. They are on the same footing as other nationalised banks and we have nothing to worry about it," Department for Industrial Policy & Promotion (DIPP) secretary R P Singh said.
The Reserve Bank of India (RBI) does not distinguish between these banks and public sector banks, he said.
When contacted, ICICI Bank spokesperson declined to comment on the issue.
Elaborating, Mr Singh said, "Banking is allowed via two ways — either you open branches, in that case you don\'t technically bring foreign direct investment (FDI), or you incorporate a bank in India, take a license from RBI and that particular bank gets equity from outside."
In the second case, he added, the lender technically becomes a foreign bank. "But that bank we are calling foreign bank only for the purpose of downstream investment, otherwise it\'s an incorporated entity in India. It is on the same footing as other nationalised banks in terms of priority sector lending and branch expansion."
Mr Singh also said these banks should not worry about any complications in making downstream investments in the insurance and non-banking finance companies (NBFC) sectors.
"Insurance has been kept out of new (FDI) rules that changed the status of ICICI Bank and HDFC Bank (to foreign owned and Indian controlled) and 100% FDI is permitted in NBFC, so there should be no problem," Singh said.
He further said the department will come out with a paper on the financial sector in a month\'s time that will address the worries of the sector regarding the new FDI rules.
FDI rules announced last year changed the criteria of calculating these investments and included American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible shares also in that category.
Going by these changed rules, ICICI and HDFC banks are lenders that are not owned by Indians, because around 74% of their equities are from outside.
The FDI norms of 2009 also say that if indirect FDI in an Indian company exceeds 50%, its investment in subsidiaries will also be treated as foreign investment.