Safe money: what you should and shouldn't do if you get fake currency notes

Do not palm them off to others: it is a crime and you will legal face action

Radhika Sharma (name changed) an overseas trader in Mumbai, was in a hurry one evening when she paid off the taxi driver as she reached her destination. Her cellphone was dead, so ditched Uber’s service that allows digital payment for a Kali Pili. She 'broke' the pink Rs 2,000 note and left with three Rs 500 ones and some change. "I hastily dump the notes in your purse and rush for my shift. The next day, when I went to use the note elsewhere, the cashier checked the note against fluorescent blue light, and said it was fake," says Sharma.

Sharma, 42, is not the only one stuck with fake currency. According to the latest annual report of the Reserve Bank of India (RBI), fake note circulation is increasing. The number of fake notes of Rs 500 denomination detected has increased by 14.4 per cent to 91,110 pieces in 2022–23 compared to the previous year. There are more Rs 500 fake notes in circulation than Rs 2,000, the RBI's annual report shows.

"My first instinct was to palm it off to some unsuspecting person," says Sharma. Section 489 A-E of the Indian Penal Code, 1860 (IPC) provides punishment relating to fake currency. "Section 489C IPC provides for punishment for possessing counterfeit currency; however, it is for those who possess it knowing it to be fake and, also intending to use it as genuine," says Naomi Chandra, partner, Singhania & Co.

You do not want to be caught doing that. Intentionally passing on a fake currency note is an offence that could lead to a prison term. "An individual, not engaged in the business of counterfeiting, but in possession of counterfeit currency notes, with knowledge of them being fake, using them deceitfully as genuine shall also be considered guilty under our laws and could face imprisonment up to 7 years or a fine, or both," says Zaheer Memon, partner, Vesta Legal.

Sharma says, "I was stuck with three Rs 500 notes, and I wasn't able to palm them off. Then I thought maybe I should put it in a donation box at a temple. But then change my mind." What could have Sharma done? The answer depends on how and where you got the note.

ATMs, banks

RBI has asked banks to take adequate safeguards / checks before loading ATMs with notes. "Banks review and load notes on ATMs that are fit to be issued to the public. The bank takes all efforts to ensure no soiled, mutilated, or counterfeit notes are loaded or issued to the customers," says Soumitra Sen, head of consumer banking & marketing, IndusInd Bank.

Some incidents have been reported in the past where ATMs have spitted out fake notes.

Adhil Shetty, chief executive officer (CEO), Bankbazaar says, "RBI guidelines stipulate that the bank has to refund the customer if the ATM is found to dispense counterfeit notes. In case you get a fake note at an ATM, try to show both the front and back of the note to the CCTV camera in the ATM and inform the security guard at the ATM about the same."

You will have to go to the bank and present the currency note and the transaction slip. The bank will ask you to fill out a form and give you an original note in lieu of the fake note.

"The currency machines in the bank will flag any fake currency. The tellers are also trained to identify any fake notes. So there’s little to no chance that you would get a fake currency note from the bank," says Shetty.

Some people try to palm off a fake note by depositing it in an ATM or bank. Last week, a man was booked for depositing fake currency in an ATM kiosk in Thane in Maharashtra. Don't take that route.

"Contact the local police or the nearest branch of the RBI to report the incident (of fake notes). Provide them with all the relevant details, such as when and where you received the fake note and any information about the person or establishment involved," says Shetty.

Follow the instructions given by the authorities and provide any additional information or evidence they may require. This may include providing a statement, providing CCTV footage (if available), or assisting in the investigation.

Prevention

According to the RBI, a bank is supposed to impound fake currency from a customer making a complaint and give her an acknowledgement receipt. A customer loses money since a fake note is never paid for but confiscated.

As per the RBI, if there are four fake notes in a single transaction, a consolidated report is prescribed and sent by the Nodal Bank Officer to the authorities or a nodal police station, along with the suspect counterfeit notes, at the end of the month. For cases of five fake notes, or more pieces in a single transaction, the counterfeit notes are forwarded immediately by the nodal bank officer to the local police authorities or the nodal police station for investigation by filing a First Information Report (FIR).

The bank will file a FIR against a person suspected of multiple fake note transactions at the local police station. A copy of the FIR is sent to the Forged Banknote Vigilance Cell at the bank's head office.

As the adage goes, prevention is better than cure. "Familiarise yourself with the security features of genuine currency notes and try to verify the authenticity of notes you receive, especially high-denomination ones," Shetty says.

"The colour of the thread (in Rs 500 note) changes from green to blue when the note is tilted. The denominational numeral with the rupee symbol in (Rs 500) in colour-changing ink (green to blue) on the bottom right is another feature. "

If you have a fake, you will lose money. You could practise caution by knowing how to identify fake notes. (RBI has more information about bank notes here)