Dispensing of fake currency notes through Automated Teller Machines (ATMs)

Dispensing of fake currency notes through Automated Teller Machines (ATMs)

There have been media reports regarding dispensation of Rs 2000 notes resembling a genuine note but bearing the legend “Children Bank of India” in place of “Reserve Bank of India” from Delhi, Meerut (Uttar Pradesh), Sitamarhi (Bihar) and a few other places.

State Bank of India (SBI) has reported one such case from its ATM in SangamVihar, New Delhi on 06.02.2017. One person, working with the cash replenishment agency and responsible for placing the cash in    ATMs, has been arrested.

RBI vide Master Circular dt. July 1,2015 has issued instructions on “Detection and Impounding of Counterfeit Notes”.

To keep a check on circulation of fake currency, RBI has taken the following steps:

1. Incorporating new security features /new designs in the banknotes to stay ahead of the counterfeiters is an ongoing process. New security features were added to banknotes in all denominations during the year 2005-2006. Government of India, in consultation with RBI, has initiated the process for introduction of new security features in Indian banknotes.

2. RBI regularly conducts training programmes on detection of counterfeit notes for employees / officers of banks and other organisations handling large amount of cash. RBI’s website provides information to the public on security features of banknotes. Posters on Know Your Banknotes are also displayed at bank branches. Regional Offices of RBI participate in various awareness programmes where the members of public are made aware of the features of Indian banknotes and ways to identify genuine Indian banknotes. Posters, leaflets, etc. are also distributed in such awareness programmes. The contents pertaining to awareness on Indian banknotes are available in www.paisaboltahai.rbi.org.in.

3. Instructions have been issued by RBI to banks that banknotes in denominations of Rs.100/- and above should be re-issued by banks over their counters or through ATMs only if these banknotes are duly checked for authenticity/genuineness and fitness by machines. The banks should re-align their cash management in such a manner so as to ensure that cash receipts in denomination of Rs.100 and above are not put into re-circulation without the notes being machine processed for authenticity. A directive in this regard under Section 35A of Banking Regulation Act, 1949 has also been issued to all scheduled banks. In order to obviate complaints regarding receipt of counterfeit notes through ATMs and to curb circulation of counterfeit notes, it is imperative for banks to put in place adequate safeguards/checks before loading ATMs with notes. Dispensation of counterfeit notes through the ATMs would be construed as an attempt to circulate the counterfeit notes by the bank concerned. The responsibility of ensuring the quality and genuineness of cash loaded at White Label ATMs is that of Sponsor Bank.

4. The process of reporting and detection of counterfeit notes, by banks, has also been rationalized in order to safeguard the interests of common man, coming across such counterfeit notes unknowingly and bringing in improvement in reporting. Under the revised procedure, all cases of detection of counterfeit notes at the bank branches / treasuries are required to be promptly reported to Police Authorities in the following manner:

(i) For cases of detection of counterfeit notes upto 4 pieces, in a single transaction, a consolidated report as per the format prescribed should be sent to the police authorities at the end of the month.

(ii) For cases of detection of counterfeit notes of 5 or more pieces, in a single transaction, FIRs should be lodged with the Nodal Police Station / Police Authorities as per jurisdiction.

5. In order to train bank staff engaged in cash handling on features of Indian banknotes, RBI has advised Indian Banks’ Association to ensure, in consultation with the banks, that all bank personnel handling cash are trained on features of genuine Indian bank notes with the objective to train all such personnel. RBI will also provide faculty support and training materials.

6. The banks have been advised by RBI that wherever counterfeit notes are detected but not impounded and reported, it will be construed as wilful involvement of the bank concerned in circulating counterfeit notes and may attract penal measures.

7. RBI has issued banknotes, in all denominations in Mahatma Gandhi Series – 2005, with a new numbering pattern. Now the numerals in both the number panels of these banknotes are in ascending size from left to right, while the first three alphanumeric characters (prefix) remain constant in size. Printing the numerals in ascending size is a visible security feature in the banknotes so that the general public can easily distinguish a counterfeit note from a genuine one.

8. Government of India in consultation with RBI has withdrawn legal tender character of banknotes in the denomination of Rs.500 and Rs.1000 issued till November 8, 2016, inter alia, to reduce the incidence of Fake Indian currency Notes. RBI has issued Rs.500 and Rs.2000 denomination banknotes in Mahatma Gandhi (New) Series. Details of the same are displayed on the RBI website for the general public. A mobile app has also been launched for creating awareness among the members of public.

Small Finance and Payment Banks

Reserve Bank of India (RBI) issued guidelines for licensing of small finance banks and payments banks on November 27, 2014 and granted in-principle approvals to 10 applicants to set up small finance banks and to 11 applicants to set up payments banks.

The guidelines for small finance banks provide inter-alia that (i) eligible promoters could be resident individuals/professionals with 10 years of banking and finance experience including companies controlled by them etc. (ii) shall primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections (iii) The minimum paid-up equity capital for small finance banks shall be Rs. 100 crore and (iv) all prudential norms and regulations of RBI as applicable to existing commercial banks including requirement of maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).

The guidelines for payment banks provide inter-alia that (i) eligible promoters can be non-bank Pre-paid Payment Instrument (PPI) issuers; and other entities like mobile telephone companies etc. (ii) shall primarily accept demand deposits upto maximum balance of Rs. 1,00,000 per individual customer. (iii) Issue ATM/debit cards, payments and remittance services. (iv) maintain CRR with the Reserve Bank on its outside demand and time liabilities and invest at least 75 per cent of its “demand deposit balances” in SLR eligible Government securities/treasury bills.

Licensed under Section 22 (1) of the Banking Regulation Act, 1949, Small Finance and Payment banks have to comply with all regulatory and supervisory frameworks that are applicable to commercial banks with suitable calibrations in view of the differentiated scope of such banks.

Cybercrime audit on banks to check loopholes

To address the issue of cyber resilience, RBI vide circular dated December 9, 2016 had instructed all authorised entities / banks issuing PPIs in the country to:

 i)                 Carry out a special audit by the empanelled auditors of Indian Computer Emergency Response Team (CERT-In) on a priority basis and take immediate steps thereafter to comply with the findings of the audit report. The audit should cover compliance as per security best practices, specifically the application security lifecycle and patch/vulnerability and change management aspects for the system authorised and adherence to the process flow approved by the Reserve Bank.

(ii)               Take appropriate measures on mitigating phishing attacks considering that the new customers are likely to be first time users of the digital channels. Safety and security best practices may be disseminated to the customers periodically.

(iii)             Implement additional measures dynamically depending upon the risk perception or threats as they emerge.

 BI has set up a Cyber Security and IT Examination (CSITE) Cell within its Department of Banking Supervision in 2015. The Bank issued a comprehensive circular on Cyber Security Framework in Banks on June 2, 2016 covering best practices pertaining to various aspects of cyber security. The circular requires banks to have among other things, a cyber-security policy, cyber crisis management plan, a gap assessment vis-a-vis the baseline requirements indicated in the circular, monitoring certain risk indicators in this area, report unusual cyber security incidents within 2 to 6 hours.

RBI has been carrying out IT Examination of banks from last year. RBI has also set up a Cyber Crisis Management Group to address any major incidents reported including suggesting ways to respond and recover to/from the incidents.

Assessing the Performance of Private Insurance Companies

As per Insurance regulatory and Development Authority of India (IRDAI), the performance of private insurance companies are assessed through the following: -

i.)                  Analysis of the financial statements and corporate governance report of the insurance companies on annual basis.
ii.)                Analysis of the statement of expenses of management and payment of commission on an annual basis.
iii.)              Analysis of the unclaimed amount of policyholders on half-yearly basis.
iv.)              Monitoring/review of the various returns filed by the insurance companies under the Public Disclosures.
v.)                Compliance of the returns regarding the statutory auditors on an annual basis.
vi.)              Analysis of the solvency returns filed by the non-life insurance companies on a quarterly basis.
vii.)            Offsite monitoring is done on an ongoing basis, which includes review of various returns / reports filed Monthly, Quarterly, Half-yearly and Annually by all the insurance companies as per the provisions of the statute and the regulations. This includes among others, New Business Performance, Claims performance and Grievance Redressal.
viii.)          The Authority carries out periodical onsite inspection of the insurers to examine the compliance of the insurers to various statutory and regulatory provisions. In case of any deviations / violations are noticed, appropriate regulatory actions are taken including directing the insurers to initiate corrective actions, wherever necessary.
ix.)              The Authority also takes into cognizance any violations observed during the course of reviewing the complaints received from the customers and initiates suitable corrective measures wherever required.

Further, IRDAI publishes a comprehensive Annual Report containing the performance of both public and private sector insurance companies, various regulatory initiatives taken and the major trends of the Insurance Sector. This report is placed on the table of the Parliament every year. This report also contains the Regulatory actions taken against insurance companies.

The Insurance Laws (Amendment) Act, 2015 empowers IRDAI to initiate prosecution with fine and imprisonment upto 10 years for violation of insurance related legislations and also to initiate adjudication proceedings and levy penalties upto Rs.25 crore.

Merger of State Bank of India (SBI) with its five subsidiaries; The existing customers of Subsidiary Banks will have access to SBI global network which has presence in all the time zones.

The Cabinet in its meeting on 15th February, 2017 has approved the proposal of acquisition of subsidiary banks of State Bank of India (SBI) i.e. State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore with State Bank of India. It shall come into effect on 1st April, 2017. The merger is aimed at economies of scale and operational efficiency leading to improved supervision process, compliance and productivity in addition to better risk management.

Detailed plans have been chalked out for re-organisation of SBI network including branches of the Associate Banks.

The aggregation of credit exposures by six entities and its oversight by one entity, post merger, imparts focus and helps in better management of the overall credit portfolio especially stressed assets.

Unified operations and efficiency improves productivity, customer service and profitability.

The existing customers of Subsidiary Banks will have access to SBI global network which has presence in all the time zones.

Government to conduct field trial with plastic banknotes at five locations of the country; Approval for procurement of plastic substrate and printing of bank notes of Rs.10 denomination on plastic banknote substrates conveyed to RBI

It has been decided to conduct a field trial with plastic banknotes at five locations of the country. Approval for procurement of plastic substrate and printing of bank notes of Rs.10 denomination on plastic banknote substrates has been conveyed to RBI.

Plastic banknotes are expected to last longer than cotton substrate based banknotes. Over the years, central banks across the world have been exploring different solutions for extending the lifecycle of banknotes. These include introduction of plastic banknotes and other developments in banknote substrates for enhancing durability including use of natural fibre blends, varnish of banknotes etc.

The following actions have been taken by RBI to focus on the need to discourage people from inscription, scrawling or scribbling on any part of the notes:

i.                    Vide its Directive dated November 07, 2001 under Section 35 ( A) of B. R. Act, 1935 advised all banks not to write anything on watermark window of banknotes.
ii.                  RBI has also issued a Press Release on December 31, 2013 on “RBI’s clarification on scribbling on Banknotes”.
iii.                RBI has advised all the bank branches to display at their branch premises at prominent place, a board indicating the availability of notes exchange facility for information of general public.
iv.                 RBI from time to time issues instructions to banks to organize exchange melas to mop up soiled and mutilated banknotes from circulation.
v.                  RBI periodically issues Press Releases appealing to the members of public not to inscribe anything on banknotes as it damages the notes and poses difficulty in identifying the features of genuine banknotes.

An inter-disciplinary Standing Committee on Cyber Security has been constituted to review the threats inherent in the existing/ emerging technology and suggest appropriate policy interventions to strengthen cyber security and resilience.

Clarification by Central Board of Direct Taxes on rollback provision in the revised India-Korea Double Taxation Avoidance Agreement

The Central Board of Direct Taxes (CBDT) has clarified that under the revised India-Korea Double Taxation Avoidance Agreement (DTAA), applications for bilateral Advance Pricing Agreement (APA) involving international transactions with Associated Enterprises in Korea for the APA period beginning Fiscal Year 2017-18 can be filed along with request for rollback provision in prescribed form. Such requests for rollback provision shall be processed in accordance with the provisions of Income Tax Act i.e. section 92CC(9A) of the Income Tax Act 1961, and the applicable Income Tax rules in this regard. Inclusion of rollback provision in such bilateral APAs would also be subject to the applicable regulations in Korea. The CBDT has issued the present clarification in response to the queries received from taxpayers regarding availability of rollback provision in respect of bilateral APA applications for APA period beginning F.Y 2017-18.

The existing DTAA between India and Korea was signed on 19th July, 1985 and was notified on 26th September 1986. A revised DTAA between India and Korea for the Avoidance of Double Taxation and the Prevention of Fiscal evasion with respect to taxes on income was signed on 18th May 2015 and entered into force on 12th September 2016. Amongst other changes, the revised DTAA incorporates para 2 in Article 9 (Associated Enterprises). Article 9(2) of the revised India-Korea DTAA provides recourse to the taxpayers of both countries to apply for Mutual Agreement Procedure (MAP) in transfer pricing disputes as well as apply for Bilateral APAs for APA period beginning F.Y. 2017-18.

Number of e-filed Income Tax Returns in Financial Year 2016-17 (till 28.02.2017) was 4.21 Cr: The total amount of refund issued in the current fiscal (including refund arising out of rectification, appeal effect etc.) is Rs. 1,48,459 crore (till 28.02.2017)

The number of e-filed Income Tax Returns in Financial Year 2016-17(till 28.02.2017) was 4.21 Cr. which represented an increase of twenty-one percent over the number filed during the corresponding period of last financial year.

The number of e-returns processed in Financial Year 2016-17 (till 28.02.2017) was 4.30 Cr.(this included the returns filed during Financial Year 2016-17 as well as backlog for earlier years).

The total amount of refund issued in the current fiscal (including refund arising out of rectification, appeal effect etc.) is Rs. 1,48,459 crore (till 28.02.2017).

The Government accords high priority to expeditious issue of refunds, particularly to small taxpayers. During Financial Year 2016-17, as on 10.02.2017, 98% of the refunds of less than Rs. 50,000/- have been issued and only 2% remain to be issued. Majority of these cases relate to recently filed tax returns or where the taxpayers’ response to the Department is awaited.

Further, to ensure expeditious disposal of backlog of refunds upto Rs. 5,000/- in non scrutiny cases pertaining to Assessment Year’s 2013-14, 2014-15 and 2015-16, instructions have been issued to field units to issue refunds in these cases without adjustment against the outstanding demand.

The law provides that income-tax returns are to be processed within a period of one year from the end of the financial year in which the return is made. Efforts have been made to shorten the timeframe over the years through greater thrust on automation, smoothening the process for e-filing, and proactive monitoring. During the current fiscal, 90% of the refunds have been issued within 60 days and 67% within 30 days of filing of return.

GOI signatory of Multilateral Competent Authority Agreement for automatic exchange of Country-by-Country Reporting (CbC MCAA) pertaining to tax cooperation to enable automatic sharing of Country-by-Country information

The Government is a signatory of Multilateral Competent Authority Agreement for automatic exchange of Country-by-Country Reporting (CbC MCAA) pertaining to tax cooperation to enable automatic sharing of Country-by-Country information

The Multilateral Competent Authority Agreement (MCAA) for automatic exchange of Country-by-Country (CbC) Reports has been developed by the Organisation of Economic Cooperation and Development (OECD) to facilitate amongst countries the automatic exchange of CbC Reports filed by Multinational Enterprises (MNEs). The MCAA has been developed to take forward the commitment of G-20 and OECD member countries, under the Base Erosion and Profit Shifting (BEPS) Project, to usher in a completely new Transfer Pricing documentation regime. The CbC Report is expected to provide countries with vital information to help them assess transfer pricing risks and select cases for audit. Detailed audit of such high-risk cases would help prevent profit shifting by MNEs through the transfer pricing mechanism. India signed the MCAA for CbC on 12/05/2016 and shall exchange CbC Reports from 2018.

As per the information available, 57 countries have signed the MCAA for CbC till date. Some of the recent signatories are Russian Federation, Mauritius, Indonesia and Gabon.

Reforms to Boost Commodities Trading

Regulatory reforms are continuous process and steps are taken continuously to further strengthen and develop commodities derivatives markets. Subsequent to the merger of the erstwhile Forward Markets Commission (FMC) with the Securities and Exchange Board of India (SEBI) in September 2015, SEBI has taken several steps towards reforming and boosting trading in commodity derivatives markets.

In order to further boost trading and liquidity in commodity derivatives markets, in consultation with the Commodity Derivatives Advisory Committee and various stakeholders, several initiatives are included in the implementation agenda of SEBI, such as the following:

(i)                 Permitting new participants in commodity derivatives markets in a phased manner.

(ii)               Permitting trading of new products like options in commodity derivatives markets.

(iii)             Integration of commodity derivatives market with other exchange traded markets which includes equity, equity derivatives, currency derivatives etc..

In pursuance of an announcement made vide Para 97 of the budget speech for the financial year 2017-18, for effecting further reforms in the commodities markets for the benefits of farmers, the Government has initiated the work in the direction of constituting an expert committee for studying and promoting creation of an operational and legal framework to integrate spot market and derivatives market for commodities trading. e-NAM is expected to be an integral part of such framework.

SEBI follows risk based supervision for various intermediaries such as brokers for equity/ derivatives segment, depository participants etc. SEBI has not finalized any proposal for introducing a risk based supervision system for commodity derivative brokers.

Resolution of Stressed Assets by Banks

Total Stressed Assets (Gross Non Performing Assets and Restructured Standard Advances) of Scheduled Commercial Banks (SCBs) was Rs.9.64 lakh crore as on Dec 31, 2016 and Reduction in NPAs- due to actual recoveries (April to Dec) for SCBs are Rs.46,245 crore at the end of Dec 31, 2016 for global operations.

RBI has provided a number of resolution tools viz. Corporate Debt Restructuring (CDR), Formation of Joint Lenders’ Forum (JLF) including rectification, restructuring and recovery, Flexible Structuring for long term project loans to Infrastructure and Core industries (5/25 Scheme), Strategic Debt Restructuring Scheme (SDR) and Sustainable Structuring of Stressed Assets (S4A).

The Government has taken sector specific measures (Infrastructure, Power, Road, textiles, Steel etc.) where incidence of NPA is high. The Insolvency and Bankruptcy code (IBC) has been enacted and Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) and The Recovery of Debts due to Banks and Financial Institutions (RDDBFI) Act have been amended to improve resolution/recovery of bank loans. Six new Debt Recovery Tribunals (DRTs) have been established for improving recovery.


Food inflation in India comparatively lower in the last six months as compared to the global food inflation based on the Food Price Index of Food and Agriculture Organization (FAO)
Food inflation as measured by the Consumer Food Price Index (CFPI) in India was comparatively lower in the last six months as compared to the global food inflation based on the Food Price Index of Food and Agriculture Organization (FAO) (Table 1).

Table 1: Food inflation based on FAO Food Price Index and CFPI (in per cent)

FAO Food Price Index
Source: Food and Agriculture Organization and Central Statistics Office.

Overall supply of food items has been comfortable. As per the second advance estimates (2nd AE) of production of food grains 2016-17 released by Department of Agriculture, Cooperation and Farmers Welfare, the production of total food grains is estimated to increase to 271.98 Million Tonnes in 2016-17 as compared to 253.16 Million Tonnes in 2015-16 (2nd AE). Pulses production is estimated to increase to 22.14 Million Tonnes in 2016-17 as compared to 17.33 Million Tonnes in 2015-16 (2nd AE).

As per the ‘Macroeconomic Impact of Demonetisation – A Preliminary Assessment’ of the Reserve Bank of India (RBI), the impact of demonetisation on inflation in the near-term stemmed mainly from moderation in food inflation, especially perishables, as inflation excluding food and fuel remained broadly unaffected. The Government has taken a number of measures to control inflation, especially food inflation. The steps taken, inter alia, include, (i) increased budgetary allocation for Price Stabilization Fund in the budget 2017-18 to check volatility of prices of essential commodities, in particular, of pulses; (ii) created buffer stock of pulses through domestic procurement and imports; (iii) announced higher Minimum Support Prices so as to incentivize production; (iv) issued advisory to States/UTs to take strict action against hoarding and black marketing under the Essential Commodities Act 1955 and the Prevention of Black-marketing and Maintenance of Supplies of Essential Commodities Act, 1980; (v) imposed 20 per cent duty on export of sugar; and (vi) reduced import duty on potatoes, wheat and palm oil.


Social Security Schemes
No. of policy holders under various social security schemes are as under:

Social Security Scheme
No. of Policy Holders (in lakhs)
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
Pradhan Mantri Suraksha Bima Yojana (PMSBY)
Aam Admi Bima Yojana (AABY)
Atal Pension Yojana (APY)

Number of claims processed/ settled and total payout as on date under PMJJBY, PMSBY and AABY are as follows:

Social Security Scheme
No. of claims
Amount paid
(Rs. in crores)
Total Payout

This was stated by Shri Santosh Kumar Gangwar, Minister of State in the Ministry of Finance in written reply to a question in Lok Sabha today.

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