Banks asked by RBI to collect counterfeit notes and give credit to customers

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

In a circular issued on 27 June 2013, the RBI said “Detection of counterfeit notes, at banks, should be at the back office or currency chest only …… 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 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.

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.

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.

Jagdish K. Gianchandani