Counterfeit currency is a big problem in India, and it has been exacerbated by the fact that banks have been slow to install counterfeit coin detection machines.
To address the problem, the Indian government has required banks to be more accountable. The design of the notes has also been changed to make them more difficult to copy, and a surprise demonetization of the existing 500 and 1,000 rupee notes was implemented.
On November 8, 2016, the Government of India declared that all 500 rupee and 1,000 rupee notes would cease to be legal tender as of November 9, 2016. The 500 rupee notes have been replaced by new notes with a completely different layout, and new 2,000 rupee notes have been introduced.
However, it has not solved the problem. More false notes are being detected than ever. To my knowledge, I have never received counterfeit Indian currency. However, I do know people who have, even from an ATM in a bank. It’s shocking, but it shows just how big the counterfeit currency problem is in India.
If it happens to you, what can you do?
Can I get a refund from the bank?
In July 2013, the Reserve Bank of India (RBI) issued a directive designed to make banks more responsible for detecting and removing counterfeit banknotes from circulation. To encourage customers to deliver false notes to banks, rather than surreptitiously trying to hide them, the directive states that banks must accept the notes and credit the customer for their value. The directive also indicated that banks would be compensated for 25% of the loss incurred with respect to counterfeit notes above Rs 100, which were detected and reported.
Based on this, it could be expected that if you received a fake note from a bank, you could hand it over for a refund. However, the reality was different.
The wording of the directive was loose, there was no easy system to handle counterfeit coins sent to banks, banks could still lose 75% of the coin’s face value, and RBI directives are routinely mocked.
Subsequently, the Reserve Bank of India revised the directive, removing the requirement that banks reimburse the customer for the value of the counterfeit currency. Currently, paragraph 2 states that ” credit will not be granted to the customer’s account for counterfeit banknotes, if any, detected in the offer received at the counter or in the back-office / currency chest ” .
The board also withdrew 25% compensation from the bank for detecting and reporting false notes.
So unfortunately, if you get stuck with fake coins, it is your concern. You can’t get money for it.
What should you do with a false note?
Nobody wants to lose by receiving counterfeit currency. It’s natural to want to try to recirculate it rather than report it. However, knowingly possessing false notes is a punishable offense under Section 489 of the Indian Penal Code . If you identify a forged note, by law you must report it to the police. File an FIR (First Information Report) at the nearest police station to investigate the matter.
What if you received the fake note from an ATM?
The Reserve Bank of India holds banks liable for counterfeit notes distributed by them and requires that necessary safeguards be put in place to ensure that ATMs are not loaded with counterfeit currency. Any dispensing of counterfeit banknotes through ATMs is treated as an attempt by banks to circulate the banknotes. Therefore, the Reserve Bank of India will penalize a bank if it is found guilty.
However, proving you received the fake note from the bank ATM is a challenge! If you realize that you received a false note before exiting the ATM, the police suggest that you hold it in front of the CCTV camera and / or report it to the security guard stationed at the ATM. Keep your ATM receipt as evidence as well. Banks will always deny that the false note came from them.
Ideally, you should present the false note to the bank. The bank will stamp the note as forged, give you an acknowledgment of receipt and send it to the Reserve Bank.
Wondering how to detect counterfeit bills? Learn more, including why the counterfeit currency problem is so big, in this article on counterfeit Indian currency and how to spot it.