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    Published On : Sat, Oct 3rd, 2015

    Taxpayers lost 53.45 crore due to FICN; while commercial banks earned 13.35 crore – VTA

    VTA currency note
    Nagpur: The counterfeit currency threat is growing unabated in India. Unfortunately its printing & quality is so superior now that it has become almost impossible to make the distinction as counterfeiters are now employing sophisticated methods and materials which have succeeded in replicating almost all the security features.

    As per Annual Report 2014-15 of Reserve Bank of India (RBI) 594,446 pieces of Fake Indian Currency Notes (FICN) were detected in the banking system, of which 95.6 per cent were detected by commercial banks and 4.4 per cent by RBI. FICN worth Rs. 24.81 crore & Rs. 28.64 crore were detected in banking transactions in the year 2013-14 & 2014-15 respectively. Although we do not have exact data of FICN in circulation in the country, however it is estimated that almost Rs.10,000 crore worth of FICN is smuggled into country largely by Pakistan-based syndicates.

    Interestingly in June 2013, RBI released a circular No. DCM (FNVD) No.5840/16.01.05/2012-13 wherein it was indicated that banks may streamline their system in a manner which will make them bear the risk of counterfeit banknotes rather than the common man who unknowingly comes in possession of such notes and it was also decided by RBI to compensate the banks 25 per cent of the loss incurred in respect of counterfeit notes of Rs.100 and above detected by them and reported to RBI and Police authorities.

    However recently, RBI by circular No. DCM (FNVD) No. 776/16.01.05/2015-16 dated 27.08.2015 withdrew its policy of compensating commercial banks to the tune of 25 per cent of the notional value of counterfeit notes detected and reported and the system of lodging claims for compensation by Forged Note Vigilance Cell of banks.

    Tejinder Singh Renu, secretary of Vidarbha Taxpayers Association (VTA) however pointed out that since on detection of FICN by banks the currency is confiscated by bank and the customer is not given credit of the said amount and from the numbers indicated in annual report of RBI, it clearly appears that taxpayers lost more than Rs.53.45 crore for no mistake of their because it’s the duty of the government to control illegal circulation of FICN in market.

    Renu also highlighted that although the taxpayers lost Rs.53.45 crore due to counterfeit notes in last two financial years, however with RBI policy of 25 per cent compensating commercial banks made banks richer by Rs.13.35 crore. In fact such money should have been credit to respective customers who were made to loss for no mistake of theirs.

    J. P. Sharma, president of VTA said, due to large amount of counterfeit currency in circulation, unauthorized money supply increases and thus raises the price level due to which inflation is caused. VTA requests Finance Ministry and RBI that in order to curb counterfeit currency its highly recommended that polymer currency notes should replace existing high denomination currency of Rs.1000 & Rs.500, which will not only take care of FICN, but shall also take of black money in circulation in the market.

    Vidarbha Taxpayers Association (VTA) has accordingly written to Prime Minister Narendra Modi, Finance Minister Arun Jaitley and RBI Governor Dr. Raghuram Govind Rajan to consider replacing paper currency of Rs.1000 & Rs.500 with polymer notes which has average life span of 5 years as compared to one year that of paper currency. Moreover this will simultaneously take care of counterfeit currency & black money in circulation or stashed in the country.
    RBI Annual Report 2014-15 page 110

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