FNV Cell shall submit a status report on a half-yearly basis
FinTech BizNews Service
Mumbai, April 1, 2024: The Reserve Bank of India (RBI) has, from time to time, issued several guidelines/ instructions/ directives to the banks on Counterfeit Notes.
A Master Direction incorporating and updating the extant guidelines /instructions/ directives on the subject has been prepared to enable banks to have all current instructions on Counterfeit Notes at one place for reference.
This Direction has been issued in exercise of powers conferred upon RBI under Section 35A and Section 56 of the Banking Regulation Act, 1949.
Master Direction on Counterfeit Notes, 2024
Detection, Reporting and Monitoring
In exercise of the powers conferred under Section 35A and Section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India (RBI) being satisfied that it is necessary and expedient in the public interest to do so, hereby, issues the Directions hereinafter specified.
1. Authority to Impound Counterfeit Notes
The Counterfeit Notes can be impounded by:
All Banks
Issue Offices of RBI
2. Detection of Counterfeit Notes
2.1 Banknotes tendered over the counter shall be examined for authenticity through machines. Similarly, banknotes received directly at the back office / currency chest through bulk tenders shall also be examined through machines.
2.2 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.
2.3 In no case, the Counterfeit Notes shall be returned to the tenderer or destroyed by the bank branches. Failure of the banks to impound Counterfeit Notes detected at their end will be construed as wilful involvement of the bank concerned in circulating Counterfeit Notes and penalty will be imposed.
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 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 3 ibid. The receipt, in running serial numbers, shall be authenticated by the cashier and tenderer. Notice to this effect shall 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 shall be followed while reporting incidence of detection of Counterfeit Note to the Police:
5.1 For cases of detection of Counterfeit Notes up to four (04) pieces in a single transaction, a consolidated report in the prescribed format (Annex III) shall 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.
5.2 For cases of detection of Counterfeit Notes of five (05) or more pieces in a single transaction, the Counterfeit Notes shall be forwarded immediately 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).
5.3 A copy of the monthly consolidated report / FIR shall be sent to the Forged Note Vigilance (FNV) Cell constituted at the Head Office of the bank.
5.4 Acknowledgement of the police authorities concerned has to be obtained for note/s forwarded to them (both for consolidated monthly statement and for filing of FIR). If the Counterfeit Notes are sent to the police by insured post, acknowledgement of receipt thereof by the police shall 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 banks due to reluctance of the police to receive monthly consolidated statement / file FIRs, the matter may be sorted out in consultation with the Nodal Officer of the police authority designated to coordinate on matters relating to investigation of Counterfeit Notes cases. The list of Nodal Police Stations may be obtained from the concerned Issue Office of RBI.
5.5 In order to facilitate identification of people abetting circulation of Counterfeit Notes, banks are advised to cover the banking hall / area and counters under CCTV surveillance and preserve the recording as per their internal policy.
5.6 Banks shall also monitor the patterns / trends of such detection and suspicious trends / patterns and bring to the notice of RBI / Police authorities immediately.
5.7 The progress made by banks in detection and reporting of Counterfeit Notes to police, RBI, etc. and problems therein, shall 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.
5.8 The data on detection of Counterfeit Notes by banks shall be included in the monthly returns forwarded to the concerned Issue Office of RBI as indicated in para 10 below.
5.9 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 shall be advised to forward the case to the Interpol Wing of the CBI, New Delhi after prior consultation with them.
5.10 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 or circulation of High Quality Counterfeit Indian 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 RBI
6.1 The banks shall re-align their cash management in such a manner so as to ensure that banknotes 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 RBI.
6.2 In order to obviate complaints regarding dispensation of Counterfeit Notes from ATMs, and to curb circulation of Counterfeit Notes, 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. This shall also be applicable to White Level ATM Operators in terms of circular DPSS.CO.OD.No.1916/06.07.011/2018-19 dated March 7, 2019.
6.3 Detection of Counterfeit Notes in chest remittances is also liable to be construed as wilful 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.
6.4 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.
7. Designating Nodal Bank Officer
Each bank shall designate a Nodal Bank Officer, district-wise to serve as the contact point for all Counterfeit Note detection related activities and notify the same to the concerned Issue Office of the RBI and Police Authorities. All cases of reporting of Counterfeit Note detection as indicated in Para 5 shall be done through the Nodal Bank Officer.
8. Establishment of Forged Note Vigilance Cell at Head Office of Bank
8.1 Each bank shall establish at its Head Office, a Forged Note Vigilance (FNV) Cell to undertake the following functions:
Dissemination of instructions issued by RBI on Counterfeit Notes to bank’s branches/ Currency Chest (CC), monitoring the implementation of these instructions, compilation of data on detection of Counterfeit Notes, and its submission to RBI, Financial Intelligence Unit-India (FIU-IND) and National Crime Records Bureau (NCRB) as per extant instructions and 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 by putting in place adequate safeguards, including surprise checks, both during the processing and transit of notes.
8.2 FNV Cell shall submit a status report on a half-yearly basis (as at the end of March and September every year), as per the format prescribed in Annex VII, by e-mail, to the Chief General Manager, Department of Currency Management, RBI, Central Office, Amar Building, Fourth Floor, Sir P. M. Road, Fort, Mumbai 400 001 (dcmfnvd@rbi.org.in) and to the concerned Issue office of RBI under whose jurisdiction the FNV Cell is functional, within a fortnight from the end of the respective half-year.
8.3 In order to update the record of the addresses of the FNV Cells, the bank shall furnish by e-mail, in the prescribed format (Annex V), the particulars to the Chief General Manager, Department of Currency Management, Reserve Bank of India and to the concerned Issue office of RBI under whose jurisdiction the FNV Cell is functional, by 15th of April, every year.
9. Provision of Devices Facilitating Detection of Counterfeit Notes
9.1 With a view to facilitate the detection of Counterfeit Notes, all bank branches / identified back offices shall be equipped with ultra-violet lamps / other appropriate banknote sorting / detection machines. In addition, all currency chest branches shall be equipped with verification, processing and sorting machines and shall be used to their optimum capacity. Such machines shall conform to the guidelines on 'Note Authentication and Fitness Sorting Parameters' prescribed by the RBI from time to time.
9.2 The banks shall maintain a daily record of the notes processed through the Note Sorting machines, including the number of counterfeits detected.
9.3 The banks shall also consider providing at least one counting machine (with dual display facility) for public use at the counter.
10. Reporting of Data to RBI / NCRB / FIU-IND
10.1 By FNV Cells of banks
Data on Counterfeit Notes detected by all branches and currency chests of the bank shall be compiled and reported by FNV Cell of the concerned bank to the Issue Office of RBI under whose jurisdiction the FNV Cell is functional. The reporting shall be made in the format (Annex VI) on monthly basis, by 7th of the following month. In case, no counterfeit note has been detected during the month, a “Nil” report shall be sent.
10.2 Under Rule 8 (1) of Prevention of Money Laundering (Maintenance of Records) Amendment Rules, 2013, Principal Officers of banks shall report information on cash transactions where Counterfeit Notes have been detected to FIU-IND, by the 15th day of the succeeding month, by uploading the information on the FINnet Portal. Similarly, data on Counterfeit Notes detection shall be uploaded on the web-enabled software of NCRB, New Delhi on their website.
11. Preservation of Counterfeit Notes Received from Police Authorities
11.1 Counterfeit Notes received back from the police authorities/courts shall be carefully preserved in the safe custody of the bank and a record thereof be maintained by the branch/ CC concerned. FNV Cell of the bank shall also maintain a branch/CC-wise consolidated record of such Counterfeit Notes.
11.2 These Counterfeit Notes at branches/CCs shall be subjected to verification on a half-yearly basis (on 31st March and 30th September) by the Officer-in-Charge of the bank concerned. They shall be preserved for a period of three years from the date of receipt from the police authorities.
11.3 Counterfeit Notes, which are subject matter of litigation in the court of law shall be preserved with the branch/CC concerned for three years after conclusion of the court case.
11.4 After the preservation period, such notes shall be sent to the concerned Issue Office of RBI under whose jurisdiction the branch/ CC is functional, with full details of the case.
12 Detection of Counterfeit Notes - Training of Staff
12.1 It is necessary to ensure that the cash handling staff in banks are fully conversant with the security features of a banknote.
12.2 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 VIII have been supplied to all the banks with instructions to display them prominently at the branches for information of the public. Details of security features of the New Design banknotes of Rs2000, Rs500, Rs200, Rs100, Rs50, Rs20 and Rs10 are available at the link https://paisaboltahai.rbi.org.in.
12.3 The Controlling Offices / Training Centres shall also organise/conduct training programmes on the security features of genuine Indian banknotes for all bank personnel handling cash to enable detection of Counterfeit Notes at the point of receipt itself. These trainings shall cover detection, impounding and reporting of Counterfeit Notes. RBI will provide faculty support and training materials, whenever necessary.
