RBI’s Master Circular for Instructions & Guidelines on “Detection and Impounding of Counterfeit Notes”
RBI has issued Master Circular dt. 20 July 2016 containing Instructions & Guidelines for “Detection and Impounding of Counterfeit Notes”. Extracts thereof are as follows:
RBI Master Circular dt. 20 July, 2016
1. Authority to Impound Counterfeit Notes
The Counterfeit Notes can be impounded by-
(i) All branches of Public Sector Banks.
(ii) All branches of Private Sector Banks and Foreign Banks.
(iii) All branches of Co-operative Banks & Regional Rural Banks.
(iv) All Treasuries and Sub-Treasuries.
(v) Issue Offices of Reserve Bank of India.
2. Detection of counterfeit notes
Banknotes tendered over the counter / received directly at the back office / currency chest through bulk tenders should be examined for authenticity through machines.
No credit to customer’s account is to be given for counterfeit notes, if any, detected in the tender received over the counter or at the back-office / currency chest.
In no case, the counterfeit notes should be returned to the tenderer or destroyed by the bank branches / treasuries. 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 and penalty will be imposed for violation of Directive No.3158/09.39.00 (Policy)/2009-10 dated November 19, 2009 issued by the Reserve Bank.
3. Impounding of counterfeit notes
Notes determined as counterfeit shall be stamped as “COUNTERFEIT NOTE” and impounded in the prescribed format (Annex I). Each such impounded note shall be recorded under authentication, in a separate register.
4. Issue of Receipt to Tenderer
When a banknote tendered at the counter of a bank branch/back office and currency chest or treasury is found to be counterfeit, an acknowledgement receipt in the prescribed format (Annex II) must be issued to the tenderer, after stamping the note as in Paragraph 2 ibid. The receipt, in running serial numbers, should be authenticated by the cashier and tenderer. Notice to this effect should be displayed prominently at the offices / branches for information of the public. The receipt is to be issued even in cases where the tenderer is unwilling to countersign it.
5. Detection of Counterfeit Notes – Reporting to Police and other bodies
The following procedure should be followed while reporting incidence of detection of counterfeit note to the Police:
For cases of detection of counterfeit notes upto 4 pieces, in a single transaction, a consolidated report in the prescribed format (Annex III) should be sent by the Nodal Bank Officer to the police authorities or the Nodal Police Station, along with the suspect counterfeit notes, at the end of the month.
For cases of detection of counterfeit notes of 5 or more pieces, in a single transaction, the counterfeit notes should be forwarded by the Nodal Bank Officer to the local police authorities or the Nodal Police Station for investigation by filing FIR in the prescribed format (Annex IV).
A copy of the monthly consolidated report / FIR shall be sent to the Forged Note Vigilance Cell constituted at the Head Office of the bank (only in the case of banks), and in the case of the treasury, it should be sent to the Issue Office of the Reserve Bank concerned.
Acknowledgement of the police authorities concerned has to be obtained for note/s forwarded to them both as consolidated monthly statement and FIR. If the counterfeit notes are sent to the police by insured post, acknowledgement of receipt thereof by the police should be invariably obtained and kept on record. A proper follow-up of receipt of acknowledgement from the police authorities is necessary. In case, any difficulty is faced by the Offices / Branches due to reluctance of the police to receive monthly consolidate statement / file FIRs, the matter may be sorted out in consultation with the Nodal Officer of the police authority designated to coordinate matters relating to investigation of counterfeit banknotes cases. The list of Nodal Police Station may be obtained from the respective Regional Office of Reserve Bank.
Banks should also monitor the patterns / trends of such detection and suspicious trends / patterns should be brought to the notice of RBI /Police authorities immediately.
The progress made by banks in detection and reporting of counterfeit notes to Police, RBI, etc. and problems thereof, should be discussed regularly in the meetings of various State Level Committees viz. State Level Bankers’ Committee (SLBC), Standing Committee on Currency Management (SCCM), State Level Security Committee (SLSC), etc.
The data on detection of counterfeit Indian notes at bank branches & treasuries should be included in the monthly Returns forwarded to the Reserve Bank Issue Offices as indicated in para 10 below.
The definition of ‘counterfeiting’ in the Indian Penal Code covers currency notes issued by a foreign government authority as well. In case of suspected foreign currency note received for opinion from the police and government agencies, etc., they should be advised to forward the case to the Interpol Wing of the CBI, New Delhi after prior consultation with them.
The Government of India has framed Investigation of High Quality Counterfeit Indian Currency Offences Rules, 2013 under Unlawful Activities (Prevention) Act (UAPA), 1967. The Third Schedule of the Act defines High Quality Counterfeit Indian Currency Note. Activity of production, smuggling distribution and circulation of High Quality Counterfeit Notes has been brought under the ambit of UAPA, 1967.
6. Examination of the Banknotes before Issuing over Counters, Feeding ATMs and Remitting to Issue Offices of the Reserve Bank
The banks should re-align their cash management in such a manner so as to ensure that cash receipts in the denominations of ₹ 100 and above are not put into re-circulation without the notes being machine processed for authenticity. The said instructions shall be applicable to all bank branches, irrespective of the volume of daily cash receipt. Any non-compliance will be construed as violation of the Directive No.3158/09.39.00 (Policy)/2009-10 dated November 19, 2009 issued by the Reserve Bank.
In order to obviate complaints regarding receipt of counterfeit notes through ATMs, and to curb circulation of counterfeits, it is imperative to put in place adequate safeguards/checks before loading ATMs with notes. Dispensation of counterfeit notes through the ATMs would be construed as an attempt to circulate the counterfeit notes by the bank concerned.
Detection of counterfeits in chest remittances is also liable to be construed as willful involvement of the chest branches concerned in circulating Counterfeit Notes and may attract special investigation by police authorities, and other action like suspending the operation of the chest concerned.
Penalty at 100% of the notional value of counterfeit notes, in addition to the recovery of loss to the extent of the notional value of such notes, will be imposed under the following circumstances:
a) When counterfeit notes are detected in the soiled note remittance of the bank.
b) If counterfeit notes are detected in the currency chest balance of a bank during Inspection / Audit by RBI
In terms of circular No.DPSS.CO.PD2298/02.10.002/2011-12 dated June 20, 2012, the responsibility of ensuring the quality and genuineness of cash loaded at White Label ATMs would be that of the Sponsor Bank.
7. Designating Nodal Bank Officer
Each bank should designate Nodal Bank Officer, district-wise and notify the same to the concerned Regional Office of RBI and Police Authorities. All cases of reporting of counterfeit note detection as indicated in Para 5 should be through the Nodal Bank Officer. The Nodal Bank Officer will also serve as the contact point for all counterfeit note detection related activities.
8. Establishment of Forged Notes Vigilance Cell at Head Office of Bank
Each bank shall establish at its Head Office, a Forged Note Vigilance Cell to undertake the following functions:
- Dissemination of instructions issued by the Reserve Bank on counterfeit notes to bank’s branches. Monitoring the implementation of these instructions. Compilation of data on detection of counterfeit notes, and its submission to Reserve Bank and FIU-IND as per extant instructions. Follow-up of cases of counterfeit notes, with police authorities / designated nodal officer.
- Sharing of the information thus compiled with bank’s CVO and report to him / her all cases of acceptance / issue of counterfeit notes over the counters.
- Conducting periodic surprise checks at currency chests where shortages/ defective /counterfeit notes etc. are detected.
- Ensuring operation of Note Sorting Machines of appropriate capacity at all the currency chests / back offices and closely monitoring the detection of Counterfeit Notes and maintaining the record of the same. Ensuring that only properly sorted and machine examined banknotes are fed into the ATMs / issued over the counters and to put in place adequate safeguards, including surprise checks, both during the processing and in transit of notes.
Forged Note Vigilance Cell shall submit status report on a quarterly basis covering the aforesaid aspects to the Chief General Manager, Department of Currency Management, Reserve Bank of India, Central Office, Amar Building, Fourth Floor, Sir P. M. Road, Fort, Mumbai 400 001, and to the Issue office of the Regional office of Reserve Bank under whose jurisdiction the FNV Cell is functioning, within a fortnight from the conclusion of the quarter under report. The said report should be sent by mail. No hard copy need be sent.
In order to update the record of the addresses of the Forged Note Vigilance Cells, the bank shall furnish by e-mail, in the prescribed format (Annex V), the address etc. particulars to the Reserve Bank every year, as on 1st July. No hard copy need be sent.
9. Provision of Ultra-Violet Lamp and Other Infrastructure
With a view to facilitating the detection of counterfeit notes, all bank branches / identified back offices should be equipped with ultra-violet lamps / other appropriate banknote sorting / detection machines. In addition, all currency chest branches should be equipped with verification, processing and sorting machines and should be used to their optimum capacity. Such machines should conform to the guidelines on ‘Note Authentication and Fitness Sorting Parameters’ prescribed by the Reserve Bank in May 2010.
The banks shall maintain a daily record of the notes processed through the Note Sorting machines, including the number of counterfeits detected.
The banks should also consider providing at least one counting machine (with dual display facility) for public use at the counter.
10. Reporting of Data to RBI
I By Bank branches
Data on counterfeit notes detected by all the branches of the bank shall be reported in the prescribed format, on a monthly basis. A statement (Annex VI) showing the details of counterfeit notes detected in the bank branches during the month shall be compiled and forwarded to the Issue Office of Reserve Bank concerned so as to reach them by 7th of the next month.
Under Rule 3 of Prevention of Money Laundering Rules, 2005, Principal Officers of banks are also required to report information on cash transactions where forged notes have been used as genuine note to The Director, FIU-IND, Financial Intelligence Unit- India, 6th Floor, Hotel Samrat, Chanakyapuri, New Delhi-110021, within seven working days.
A “nil “report may be sent in case no counterfeit has been detected during the month.
II By Co-operative Banks and Regional Rural Banks
Data on Counterfeit Notes detected by branches of Co-operative Banks and Regional Rural Banks should be furnished on monthly basis to the respective Issue Office of Reserve Bank in prescribed format (Annex VI).
11. Preservation of Counterfeit Notes Received from Police Authorities
All Counterfeit Notes received back from the police authorities/courts may be carefully preserved in the safe custody of the bank and a record thereof be maintained by the branch concerned. Forged Note Vigilance Cell of the bank shall also maintain a branch-wise consolidated record of such Counterfeit Notes.
These Counterfeit Notes at branches should be subjected to verification on a half-yearly basis (on 31st March and 30th September) by the Officer-in- Charge of the bank office concerned. They should be preserved for a period of three years from the date of receipt from the police authorities.
They may thereafter be sent to the concerned Issue Office of Reserve Bank of India with full details.
Counterfeit notes, which are the subject matter of litigation in the court of law should be preserved with the branch concerned for three years after conclusion of the court case.
12. Detection of Counterfeit Notes – Training of Staff
It is necessary to ensure that the cash handling staff in banks and treasuries / sub-treasuries is fully conversant with the security features of a banknote.
With a view to educating the branch staff on detection of counterfeit notes, the design and security features of all the banknotes shown in Annex VII have been supplied to all the banks / treasuries with instructions to display them prominently at the branches for information of the public. Posters of the 2005-06 series of banknotes have also been supplied to bank branches for display at the branches. Posters of the 2005-06 series are also available for download inhttp://www.paisaboltahai.rbi.org.in.
The Controlling Offices / Training Centers should also organise / conduct training programmes on the security features of banknotes for members of staff to enable detection of counterfeit notes at the point of receipt itself. The banks should ensure that all bank personnel handling cash are trained on features of genuine Indian bank notes. The Reserve Bank will also provide faculty support and training materials.