Reserve Bank of India’s, Department of Currency Management, vide a Notification dt. 09/05/2012, has advised banks to re-align their cash management in such a manner so as to ensure that cash receipts in the denominations of Rs100 and above should not be put into re-circulation without the notes being machine processed for authenticity.
The above instructions shall come into effect immediately and are applicable to all bank branches, irrespective of the volume of daily cash receipt.
Further, RBI (DCM) has made it clear that any non-compliance will be construed as violation of the above mentioned Directive issued by Reserve Bank of India.
The notification dt.09/05/2012, is with respect to Para 127 of the Monetary Policy Statement 2012-13 announced by RBI Governor on April 17, 2012 (copy enclosed),
Para 127 is as under:
Detection and Reporting Mechanism of Counterfeit Bank Notes
It has already been stipulated that bank notes in the denomination of Rs100 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 rationalizing 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.
Directive No. 3158/09.39.00 (Policy)/2009-10 dated November 19, 2009 read with Circular No. NPD.3161/03.39.00 (Policy)/2009-10 dated November 19, 2009 on Sorting / Processing of banknotes, advising the banks that banknotes in the denomination of 100 and above may be re-issued over their counters or through ATMs, only if such banknotes have been duly checked for authenticity / genuineness by machines. Further, the banks were also advised to use such machines in all bank branches with average daily cash receipt of Rs50 lakh and above, within a definite time frame.
There are 80,000+ Bank Branches in India, and depending on the average cash turnover, the branch can be equipped with Heavy Duty Note Sorting Machines or Desk Top Note Sorting Machines.
As the RBI Guidelines on Note Authentication and Fitness Sorting Parameters are exhaustive, the Vendors of Note Sorting Machines can fine-tune the machines to meet the regulator requirements.
This will enable Banks also to evaluate the machines against the RBI parameters before placing orders.
The machines are expected to perform authenticity check with reference to the features of genuine notes as disclosed by the Reserve Bank of India from time to time. Any note which is not found to be having all the features of a genuine note shall be classified by the machine as suspect.
The Bank Notes can only be recycled / reissued if they are evaluated as genuine and fit according to the parameters laid down by RBI
(RBI Guidelines on Note Authentication and Fitness Sorting Parameters are attached).
There are two steps involved before the Bank Note can be re-issued i.e Authenticity Check followed by Fitness sorting.
Authenticity check is a prerequisite for fitness sorting.
Fitness sorting can be done only in case of genuine notes. The machines shall be able to identify and separate suspected counterfeits and notes which are unfit for circulation in terms of these standards in a reliable and consistent fashion.
A fit bank note is a note that is genuine, sufficiently clean to allow its denomination to be readily ascertained and thus suitable for recycling.
An unfit bank note is a note that is not suitable for recycling because of its physical condition or belongs to a series that has been phased out by Reserve Bank of India.
All the fitness parameters laid down by RBI are to be evaluated individually.
A bank note must pass all the fitness parameters to be considered fit for recycling.
The standard features of note counting machines are
Ergonomic design, sturdy, capable of working in dusty, hot and humid conditions in India
Number of Stackers with capacity
Number of Reject Stackers with capacity
Processing Speed programmable for diverse sorting parameter
Feeding Capacity – Minimum 500 Notes with Assisted Feed mechanism
Travel path is straight
First Note recognition
Machine’s detect and sort suspect Notes
Fitness sorting: The machines perform fitness sorting functions as per criteria and standards laid down in RBI Guidelines on Note Authentication and Fitness Sorting Parameters viz
K Mutilated, Imperfect and Mismatched Notes
– Batching Arrangement
– Possibility of up gradation of software as per RBI directive or as per bank requirements
– The technology is image based
– User interface machine normally have attached printer, display with function, menu keys, external display for count of notes.
– Printer interface facility
– Power supply requirements and consumption
-Voltage stabilizer – inbuilt or external
– Machines have LCD graphic mode Digital display of information with value / Nos. of Notes
– Warranty (3 years, unconditional)
Guidelines on Note Authentication and Fitness Sorting Parameters
A fit note is a note that is genuine, sufficiently clean to allow its denomination to be readily ascertained and thus suitable for recycling. An unfit note is a note that is not suitable for recycling because of its physical condition or belongs to a series that has been phased out by Reserve Bank of India. All the fitness parameters laid down in this document are to be evaluated individually. A note must pass all the fitness parameters to be considered fit for recycling.
These parameters provide the minimum standards for cash handling machines used by banks (hereinafter called ‘the machines’). Notes can only be recycled / reissued if they are evaluated as genuine and fit according to these parameters. Authenticity check is a prerequisite for fitness sorting. Fitness sorting can be done only in case of genuine notes. The machines shall be able to identify and separate suspected counterfeits and notes which are unfit for circulation in terms of these standards in a reliable and consistent fashion.
The Reserve Bank of India phases out certain series (issue) of notes from circulation from time to time. These notes, though considered legal tender unless otherwise specified, are unfit for recycling. As and when the Reserve Bank of India decides to phase out a specific series (issue) of a specific denomination of notes, the machines shall sort all the phased out notes as unfit, irrespective of their physical condition.
These parameters are applicable to machines operated by banks, either directly by their staff or indirectly by their agents. These machines can be of any of the following:
(i) Machines which check the authenticity and fitness of notes, i.e. note processing machines / note sorting machines, and
(ii) Machines which check only the authenticity of notes, i.e. note authentication machines. All these machines shall classify the individual notes as either genuine or suspect.
3. Authenticity Check
The machines shall perform authenticity check with reference to the features of genuine notes as disclosed by the Reserve Bank of India from time to time. Any note which is not found to be having all the features of a genuine note shall be classified by the machine as suspect.
4. Fitness Sorting
As a part of fitness sorting, notes with any visual or physical defects are to be sorted as unfit as per the specified criteria, set out below.
Sorting Criteria/Feature Criteria
1 Soiling – General distribution of dirt across the entire note
2 Limpness – Structural deterioration resulting in a marked lack of stiffness
3 Dog-ears Corner folds
4 Tears – Lengthwise and crosswise cuts
5 Holes – Holes of a specific diameter
6 Stains – Localized concentration of dirt
7 Graffiti – Deliberate graphic alteration of the note
8 Crumples – Multiple random folds
9 Decolouration – Lack of ink on part or whole of the note, e.g. a washed note
10 Folds – Folds reducing the length or width of the note
11 Repair – Note repaired using adhesive tape/ paper/ glue
(i) Soiling: Soiling refers to the general distribution of dirt across the entire note or in some patterns.
It is a measure of the loss of reflectivity from the unprinted areas due to dirt, ageing (yellowing), wear and extraneous markings and includes decolouration due to aging, excessive folding wear and other wearing. Soiling increases the optical density and decreases the reflectance of the notes. Notes exceeding the soiling levels shall be sorted as unfit. Both the obverse and the reverse of the note shall be checked for soiling.
(ii) Limpness: Limpness relates to structural deterioration or wear resulting in a marked lack of stiffness in the note paper. Notes with a very low stiffness shall be sorted as unfit. Notes with very low stiffness of paper, i.e. with paper which is worn out in circulation or mechanically mutilated shall be sorted out as unfit. Detectors for paper quality shall be adapted to the same level as for soiling.
(iii) Dog-Ears: Notes with dog-ears with an area of more than 130 mm² and a minimum length of the smaller edge greater than 10 mm shall be sorted as unfit. Chipped notes shall also be sorted as unfit.
(iv)Tears: Notes exhibiting at least one tear at the edge shall be classified as those having tears. Notes with tears larger than those indicated in Table shall be sorted as unfit.
Table – Tears
Sl. No. Direction Width Length
1 Vertical 4 mm 8 mm
2 Horizontal 4 mm 15 mm
3 Diagonal 4 mm 18 mm
Measured by drawing a straight line from the peak of the tear to the edge of the note where the tear begins (rectangular projection), rather than measuring the length of the tear itself.
(v) Holes – This refers to notes with at least one visible hole. Notes with holes with area exceeding 10 mm shall be sorted as unfit.
(vi) Stains – Stains are visible markings which are not part of the feature of a note. Notes shall be detected as unfit if localized – i.e. with limited extension – stain can be recognized on its surface. In case the total area covered by stains exceeds 500 mm², the note shall be sorted as unfit. A note with a single stain covering an area of more than 200 mm² shall be sorted as unfit. Both the obverse and the reverse of the note shall be checked for stains.
(vii) Graffiti – Graffiti refers to deliberate graphic alteration of the note with for example, figures or letters. Fitness sorting criteria in case of graffiti shall be the same as those for stains. Both the obverse and the reverse of the note shall be checked for graffiti.
(viii) Crumples/ Folds – Crumpled / folded notes shall be sorted as unfit if the folds result in reduction of the original note in length or width greater than 5 mm.
(ix) Decolouration – Notes affected by decolouration shall be sorted as unfit if the ink is partially or wholly missing from its surface. Both the obverse and the reverse of the note shall be checked for decolouration.
(x) Repair – A repaired note is created by joining parts of the same note together, for example, by using extraneous matter such as tape, paper or glue. Notes with the following types of repairs shall be sorted as unfit:
• Repairs covering an area greater than 100 mm²; or
• Thickness of the extraneous matter 50 μm or more; or
• Width of the extraneous matter 10 mm or more; or
• Length of the extraneous matter 10 mm or more.
5. Mutilated, Imperfect and Mismatched Notes
A mutilated note is note, of which a portion is missing or which is composed of more than two pieces. An imperfect note is a note, which is wholly or partially, obliterated, shrunk, washed, altered or indecipherable but does not include a mutilated note.
A mismatched note is a note, which has been formed by joining a half note of any one note to a half note of another note. Such notes shall be classified as unfit.
In a nutshell, it would be advantageous for all the participants in the Banking cycle to migrate to ePayments (Safe ePayments).