Incentives for Detection and Reporting of Indian counterfeit notes by Indian Banks


 

Reserve Bank of India has to depend on Banks to report counterfeit notes. Without adequate reporting, it is difficult for Reserve Bank to assess the number of counterfeit notes in circulation and its ramifications for the economy.

With reference to paragraph 115 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.

RBI vide notification number RBI/2012-13/562 DCM (FNVD) No.5840/16.01.05/2012-13 dt.June 27, 2013,  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.

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.

These instructions become effective from July 1, 2013, and the banks have been advised to commence reporting to RBI from August 2013.

1. Monetary Policy Statement 2012-13 – Extract

Detection and Reporting of Counterfeit Banknotes

Paragraph 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.
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