DCM (FNVD) G- 2/16.01.05/2014-15
July 1, 2014
The Chairman / Managing Director,
Commercial Banks, Cooperative Banks, RRBs,
Private Banks, Foreign Banks and
Director of Treasuries of all States
Dear Sir / Madam,
Master Circular – Detection and Impounding of Counterfeit Notes
Please refer to the Master Circular DCM (FNVD) No.G-5/16.01.05/2013-14 dated July 1, 2013 consolidating the instructions issued till June 30, 2013 relating to Detection and Impounding of Counterfeit Notes. The Master Circular has since been updated by incorporating the instructions issued till date and has been placed on the RBI website www.rbi.org.in.
The Master Circular is a compilation of the instructions contained in the circulars issued by RBI on the above subject which are operational as on the date of this Circular.
General Manager (Officer-in-Charge)
Encl: Master Circular
Master Circular – Detection and Impounding of Counterfeit Notes – 2014-15
RESERVE BANK OF INDIA
DEPARTMENT OF CURRENCY MANAGEMENT
MASTER CIRCULAR – 2014-15
Detection and Impounding of Counterfeit Notes
Para 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.
Para 2 Detection of counterfeit notes
Detection of counterfeit notes should be at the back office / 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 account or value in exchange given.
Thereafter the notes should be passed over to the back office / currency chest, as the case may be, for detailed verification and authentication through machines
The banknotes categorized as suspect during machine processing should be subjected to manual verification for checking their authenticity.
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.
Para 3 Impounding of counterfeit notes
The notes identified as counterfeit should be kept separately with proper impounding stamp as per the format (Annex I). Details of each impounded note should be recorded under authentication in a separate register.
Para 4 Issue of Receipt to Tenderer
For such notes, there will not be any requirement to issue acknowledgement to the tenderer. Notice to this effect should be displayed prominently at the offices / branches for the information of the public.
Para 5 Detection of Counterfeit Notes - Reporting to Police and other bodies
A counterfeit note detected in the cash received by the bank /Treasury, shall be impounded, in the manner detailed in Para 2 above.
Thereafter, the following procedure should be followed while reporting incidence of detection of counterfeit noteto the Police:
For cases of detection of counterfeit notes upto 4 pieces, in a single transaction, a consolidated report (Annex II) 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 (Annex III).
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 9 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.
Para 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.
Reserve Bank may consider the option of levying higher penal interest/penalties for the amount of forged notes detected in the chest remittances by RBI or during inspection.
Para 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.
Para 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 proforma (Annex IV), the address etc. particulars to the Reserve Bank every year, as on 1st July.
Para 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.
Para 10 Reporting of Data to RBI
I By Banks
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 V) - 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.
Bank branches need not report the data to NCRB.
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 Forged Note Vigilance Cell of Bank
Forged Note Vigilance Cell set up at the Head Office of the bank (other than Cooperative and Regional Rural Banks) shall submit a monthly Return reflecting data on banknotes processed (` 100 and above), counterfeit notes detected by the bank, on an all-India basis in a prescribed proforma described at Para 11 ,
A "nil" report may be sent in case no counterfeit has been detected during the month.
III 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 (Annex V).
Data on an all-India basis should be compiled at the Head Office of the bank on a monthly basis in the prescribed proforma described at Para 11.
Para 11 Compensation
The banks will be compensated by RBI to the extent of 25 % of the notional value of the counterfeit notes of ` 100 denomination and above, detected and reported to RBI and Police authorities.
Claims for compensation should be made through the Forged Note Vigilance Cell of the banks in the prescribed format (Annex VI) on a monthly basis through email within fifteen days of the succeeding month.
Reimbursement will be done by RBI, Department of Currency Management, to begin with, on a quarterly basis.
A review of the above system will be conducted after one year.
Para 12 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.
Para 13 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 in http://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 within a period of 2 years. The Reserve Bank will also provide faculty support and training materials.