RBI/2011-12/544
DCM (FNV) No. 5063/16.02.22/2011-12

May 09, 2012

The Chairman and Managing Director / Chief Executive Officer
All Scheduled Commercial Banks (Including RRBs) and
Scheduled State Co-operative Banks /
Scheduled (Primary) Urban Co-operative Banks

Dear Sir/Madam,

Detection and Reporting Mechanism of Counterfeit Notes –Monetary Policy Statement 2012-13

Please refer to our 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 Rs.  50 lakh and above, within a definite time frame.

2. In light of Para 127 of the Monetary Policy Statement 2012-13 announced by RBI Governor on April 17, 2012 (copy enclosed), banks should now re-align their cash management in such a manner so as to ensure that cash receipts in the denominations of Rs.  100 and above should not be put into re-circulation without the notes being machine processed for authenticity.

3. The above instructions shall come into effect immediately and are applicable to all bank branches, irrespective of the volume of daily cash receipt.

4. Any non-compliance will be construed as violation of the above mentioned Directive issued by the Reserve Bank.

5. Please acknowledge receipt.

Yours faithfully,

(Dr. N Krishna Mohan)
Chief General Manager

Encl: One

Extract Para 127 of the Monetary Policy Statement 2012-13

127.  It has already been stipulated that bank notes in the denomination of Rs. 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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