Counterfeit currency could be part of the money withdrawn from an ATM or the currency notes given to you at the supermarket or even at a bank counter. The reason is simple -- the mechanism for preventing the circulation of fake currency notes has enough loopholes, akin to most public systems meant to prevent fraud.

Though the Reserve Bank of India insists that the currency notes of denomination of 100 and above, circulated by banks, must go through mandatory sorting by machine, the guideline is not adhered to by several banks. RBI has devised a system whereby the currency notes could be checked at the branches or at the currency chest, a regional currency management set-up, operated at a particular office where currency notes are received from various branches. Even if one branch fails to identify fake currency, the machine at the currency chest can detect it.

But the problem arises when the currency received by a particular branch where the Note Sorting Machine (NSM) is absent or nonfunctional starts sending the notes back into circulation. Bankers aver that such incidents are few, but the fact is that many cases are not reported. The reason – the case would have to be registered with the police. Once the customer intimates the bank about the incident, both parties would be interested in hushing up the matter in order to escape procedural wrangles. However, a top Crime Branch police officer who probed several counterfeit currency cases said an innocent possessor won’t face any charge.

The officer said banks would have to inform police when the amounts involved are larger. A branch of HDFC Bank in the city reported the receipt of 33 counterfeit notes of 1000-rupee denomination a month ago. SBI branch in the city had reported receipt of 17 counterfeit notes of 500-rupee denomination in August, 2011. ICICI Bank and Dhanlaxmi Bank had also reported similar cases in Ernakulam district in the past.

At least 10 cases involving fake currency worth about Rs.1 lakh have been registered by police at places such as Puthenvelikkara, Chengamanad, Perumbavoor, Vazhakkulam, Vadakkekkara, North Paravur and Munambam in the district during the past two years. This is in addition to the fake notes seized at Nedumbasserry airport and Kochi seaport.

The racketeers are using the Bangladesh route to bring fake currency printed in foreign countries to India. Another important route of fake currency transaction is the foreign money exchange. Expatriates working in Middle East can bring Indian currency during every trip. Though RBI has fixed a limit of Rs.7,500 per person for each trip, the expatriate is free to get more currency from different exchanges in the Gulf countries.

The Indian government has no authority to enforce any regulation on the functioning of money exchanges abroad. The government could initiate a dialogue with the foreign counterparts to restrict the activity, said V.George Antony, a top official of UAE Exchange, a group handling money transfer operations.

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