Commercial banks reported higher detection of counterfeit notes after the Reserve Bank of India (RBI) introduced a target-based incentive/penalty system.
During 2013-14, 4.88 lakh pieces of counterfeit notes were detected. Of this, 4.68 lakh pieces (95.9%) were detected by bank branches and 19,827 (4.1%) by RBI offices. To check this, the RBI has asked banks to set up forged notes vigilance (FNV) cells and install note sorting machines in chests/branches.
Which denominations saw the maximum fakes?
Last financial year, Rs 1,000 and Rs 100 notes had the maximum fakes. They saw an increase by 11.8% and 9.8%, respectively. Interestingly, the number of fake Rs 500 notes fell by 10.3% as compared to the previous year, according to an RBI annual report released recently. These figures do not take into account the counterfeit notes seized by the police and other enforcement agencies.
What steps are RBI taking?
It has asked banks to instil con?dence in the public. Banks have been advised to re-align their cash management to ensure that cash receipts in denominations of Rs100 and above are not put into re-circulation without notes being machine-processed for authenticity.
Will fakes put money out of circulation?
No. Demand for banknotes and coins are only rising, despite the growth of
technology-driven, non-cash modes of payment. The demand continued to rise in 2013-14. At the close of March 2014, the value of the banknotes in circulation stood at Rs128.29 crore, registering an increase of 10.1% over end-March 2013. The volume of banknotes in circulation during the same period increased to 77 billion pieces, an increase of 5.2%.
What about coins?
Coins in circulation also rose, as was the trend in the past few years. They increased by 8.2% and 13.1% in terms of volume and value, respectively.
Now, what about soiled notes?
During 2013-14, around 14.2 billion pieces of soiled banknotes were disposed, against a target of around 17 billion pieces. For 2014-15 again, 17 billion pieces has been ?xed as the target.