RBI Incentive Scheme for Counterfeit Note Detection

RBI/2012-13/562 DCM (FNVD) No.5840/16.01.05/2012-13 June 27, 2013 The Chairman and Managing Directors/ Chief Executives Officers of All Scheduled Commercial Banks Madam / Sir, Detection and Reporting of counterfeit notes Please refer to the paragraph 115 ( extract enclosed ) of the Monetary Policy Statement for 2013-14 announced on May 3, 2013. It was indicated therein that the guidelines on the scheme of incentives for detection and reporting of counterfeit notes and the scheme of penalties for non-detection and non-reporting of counterfeit notes, by banks, would be issued by end-June 2013. A reference is also invited to Para 127 ( extract enclosed ) of the Monetary Policy Statement for 2012-13 announced on April 17, 2012, wherein it was indicated that banks may streamline their system in a manner which will make them bear the risk of counterfeit banknotes rather than the common man who unknowingly comes in possession of such notes and our Circular   DCM (FNVD) No. 2165/16.21.005/2012-13 dated November 16, 2012 ( copy enclosed ) advising that failure on the part of the banks to impound counterfeit notes detected at their end will be construed as willful involvement of the bank concerned in circulating counterfeit notes, and appropriate penalty will be imposed. 2. It has been decided to compensate the banks 25% of the loss incurred in respect of counterfeit notes of ` 100 and above detected by them and reported to RBI and Police authorities. 3. The procedure for detection and reporting counterfeit notes and penalty there under have been reviewed in light of the above instructions as per details enclosed in the Annex . All other instructions remain unchanged. 4. These instructions become effective from July 1, 2013, and the banks should commence reporting to RBI from August 2013, as per format enclosed. 5. Kindly acknowledge receipt. Yours faithfully, (B. P. Vijayendra) Principal Chief General Manager Encl: As above 1. Monetary Policy Statement 2012-13 – Extract Detection and Reporting of Counterfeit Banknotes 115.  In view of the recommendation of the DPSC for addressing the menace of counterfeit notes, it has now been decided that in order to encourage banks to report counterfeit notes detected by them, a scheme of incentives for banks will be introduced. Simultaneously, the existing penalty for non-detection and non-reporting of counterfeit notes by banks is being revisited. Detailed guidelines will be issued by end-June 2013. 2. Monetary Policy Statement 2012-13 – Extract Detection and Reporting Mechanism of Counterfeit Banknotes 127. It has already been stipulated that bank notes in the denomination of  ` 100 and above are processed through machines conforming to the standards/parameters prescribed by the Reserve Bank,  before  issuing  them  over their counters or through ATMs. The stipulation has been made,  inter alia , to ensure that counterfeit notes are detected at bank/branch level itself, thereby preventing their entry back into circulation. It is also observed that despite the above measure and after rationalising the procedure of filing first information reports (FIRs), the detection and subsequent reporting of counterfeit bank 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 order to address the above concerns, banks are advised: to ensure that the notes received over the counters are re-circulated only after ensuring their proper authentication through machines; and to streamline their system in a manner which will make them bear the risk of counterfeit bank notes rather than the common man who unknowingly comes in possession of such notes. DCM (FNVD) No. 2165/16.21.005/2012-13 November 16, 2012 The Chairman and Managing Director / Chief Executive Officer All Scheduled Commercial Banks (Including RRBs) and Scheduled State Co-operative Banks/ Scheduled (Primary) Urban Co-operative Banks Dear Sir/ Madam, Detection and Reporting of counterfeit notes – Second Quarter Review of Monetary Policy 2012-13 We invite your attention to Para Nos. 126 and 127 of the Second Quarter Review of Monetary Policy 2012-13 ( copy enclosed ) in terms of which failure of the banks to impound counterfeit notes detected at their end will be construed as willful involvement of the bank concerned in circulating counterfeit notes. 2. You are advised to immediately put in place a suitable system to ensure that counterfeit notes detected are duly impounded and reported, by following the prescribed procedure. 3. In case of any failure to adhere to the above instructions, penalty for violation of our Directive No. 3158/09.39.00 (Policy)/2009-10 dated November 19, 2009 will be imposed on the bank. 4. Please acknowledge receipt. Yours faithfully, (B P Vijayendra) Chief General Manager Encl: One SECOND QUARTER REVIEW OF MONETARY POLICY 2012-13 Detection and Reporting Mechanism of Counterfeit bank notes 126. In May 2012, banks were advised to re-align their cash management to ensure that cash receipts in denomination of ` 100 and above are not put into re-circulation without being machine- processed for authenticity. Banks have option of either providing machines to their branches or ensuring that branches which do not have the machines, are supplied only machine processed notes for distribution among the public.  Detection and Reporting Mechanism of Counterfeit Bank Notes 127.  It is observed, however, that reporting of detection of counterfeit notes has not improved on the expected lines. It needs to be emphasized that although 90 per cent   of the currency chest are with the public sector banks, they account for reporting a mere 10 per cent of counterfeit notes, while private sector banks with less than 10 per cent of currency chests are reporting 90 per cent of such cases. A review on the status of implementation of the Reserve Bank’s instructions issued on May 2012 will be made in the first week of November 2012. It is reiterated that wherever counterfeit notes are detected but not impounded and reported, it will be construed as willful involvement of the bank concerned in circulating counterfeit notes and may attract penal measures.

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2012-13/562 · issued 27 Jun 2013. The plain-English explanation above is BankPulse’s own independent summary.

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