The unholy connivance behind fake notes in ATMs

Fake notes: A suspect has been held in the fake note dispensing case in Delhi

It was certainly not a child’s play to shuffle the fake 2,000 currency notes churned out by the fictional ‘Children Bank of India’ with those of the Reserve Bank of India (RBI) and pump into the State Bank of India’s automated teller machine (ATM) for disbursal. But it happened late last month when the ATM in south Delhi’s Sangam Vihar dispensed four fake notes of the highest denomination which appeared genuine at first glance but a closer look revealed it otherwise.

It brings into focus the post-demonetisation role played by some banks and the unholy connivance of their employees with the racketeers who made hay while the sun shone by syphoning off the major chunk of demonetised notes at a cut as huge as 35 per cent. It was this permeable trait of the banking channel and inept handling by the RBI Governor Urjit Patel which did not let the demonetisation gain momentum, notwithstanding its ‘short pains, long gains’ tagline.

fake noteA customer care executive of Chhatarpur, Rohith found himself duped when all the four bills in the denomination of 2,000 he withdrew were found issued by the non-existent ‘Children Bank of India’ and ‘Bharatiya Manoranjan Bank’. Interestingly, the notes carried stark deviations, such as, ‘Guaranteed by the Children’s Government’ in place of ‘Guaranteed by the Central Bank’, ‘Churan lable’ instead of the latent image, and a ‘PK’ logo in lieu of the RBI seal. To verify the veracity of the complaint, the police sub-inspector inserted his own debit card and, he too stood robbed in the process. Accordingly, an FIR for printing documents resembling currency notes, using counterfeit notes and cheating was registered, the ATM sealed and an employee of the cash delivery unit arrested after the investigation.

Similar incidents were reported from Ghaziabad and Shahajahanpur also. The fraudulent electronic disbursal further spread its tentacles to Rohtak in Haryana last week where the ICICI bank ordered a probe for a similar dispensation of 2,000 notes issued by the ‘Children Bank of India’. These notes were printed with ‘Ek Kadam Swachhta ki Aur’ and ‘Bharatiya Manoranjan Bank’ also.

No security features
The reasons for such frauds are not difficult to understand. More than 60 per cent ATMs use outdated technology and lack basic security features, rendering them prone to counterfeit currency, shares a retired CVO of a public sector bank. Cash loaders don’t use the ‘one-time combination’ (OTC) locking method as is done in many developed countries. Still worse, most of the ATMs are not monitored by working closed-circuit television cameras (CCTV). The inadequate security mechanism allows cash loaders to use ATMs whenever they want, without any electronic surveillance.

On November 8 last, Prime Minister Narendra Modi announced that, at the stroke of midnight, some 14 trillion rupees worth of 500 and 1,000 notes — 86% of all the currency in circulation — would no longer be legal tender. Modi’s stated goal was to make good on his campaign pledge to fight ‘black money’: the illicit proceeds — often held as cash — of tax evasion, crime, and corruption. He also expected to render worthless the counterfeit notes reportedly printed by Pakistan to fuel terrorism against India.

However, it appears, the bankers were not as serious as the Indian premier to make it happen. The demonetisation came as a Modi-sent windfall to fraudster-bankers to mint money, making the common man bleed. It was, in fact, they who did not let the demonetisation take off with full steam.

Tax raids
The Finance Ministry instructed all revenue intelligence agencies to join the crackdown on forex traders, hawala operators and jewellers besides tracking movement of demonetised currency notes. It was reported that the Prime Minister’s Office (PMO) was directly coordinating the raids. Income Tax department raided various illegal tax-evasive businesses in Delhi, Mumbai, Chandigarh, Ludhiana and other cities that traded with demonetised currency. The Enforcement Directorate issued several FEMA notices to forex and gold traders. A Large sum of cash in defunct notes was seized in different parts of the country. In Chhattisgarh, liquid cash worth of 4.4 million (US$65,000) was seized. Delhi-based lawyer, Rohit Tandon’s case is an eye opener.

As of mid-January, official sources said, the Income Tax department detected over 4,172 crores of undisclosed income and seized new notes worth 105 crores as part of its country-wide operations. The department carried out a total of 983 searches, survey and enquiry operations and issued 5,027 notices. The department further seized cash and jewellery worth over 549 crores out of which the new currency seized (majority of them 2,000 notes) is valued at about 242 crores. The department referred a total of 477 cases to other agencies like the CBI and the Enforcement Directorate (ED) to probe fiscal crimes like money laundering, disproportionate assets and corruption.

Note seizure
Huge cash in the form of newly infused notes was seized all over India after the demonetisation. As of December 2016, over 4 crores in new banknotes of 2,000 were seized from four persons in Bangalore, 33 lakh in 2,000 notes were recovered from Manish Sharma, an expelled BJP leader in West Bengal, and 1.5 crores was seized in Goa. Further, 900 notes of the new 2,000 notes were seized from a BJP leader in Tamil Nadu. Around 10 crores were seized in Chennai.

Over 60% ATMs use outdated technology and lack basic security, making them prone to counterfeit currency

In its first crackdown on bank officials, CBI arrested a relationship manager of Axis Bank’s Burra Bazar branch and a central Kolkata businessman for trying to illegally convert scrapped currency and siphon it off through a web of ‘bogus companies’. The agency also arrested an aide of the businessman who acted as a carrier of the cash. The arrests came after marathon raids, searches and series of interrogations by the Enforcement Directorate, CBI and the Income Tax department. Armed with a Supreme Court judgment in the Ramesh Gelli versus Union of India’s case which expanded the purview of public servants to include even the private bank employees as discharging public duty, CBI arrested Axis staffer Amitesh Sinha. Many other arrests were made subsequently as well.

Public sector banks
It is a fact that Public sector banks dominate the Indian financial sector. They are the main source of loans to small businesses and large projects alike. They are vehicles for Modi’s ambitious Jan Dhan Yojana. But, sadly, they are inefficient, poorly governed and beset by large-scale corruption, comments Chandigarh-based lawyer Ripjit Narang. In May 2016, the All India Bank Employees’ Association (AIBEA) assessed wilful defaults worth 70,300 crore in 400 PSB loan accounts. The SBI Chairman Arundhati Bhattacharya in a candid conversation called for a thorough shake-up in the regulatory system and asked for tougher rules for defaulters.

The RBI failed to discharge its duties in consonance with its own preamble which defines its duties: “To regulate the issue of Bank notes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.”

All this only indicates that the RBI was a big failure and the Governor Urjit Patel a bigger disappointment in transiting the demonetisation in tandem with its preamble. Patel cannot escape his liability to explain as to why more than 50 sets of instructions were issued, practically every alternate day, in piecemeal, making a mockery of the institution. He has to admit his inept handling by not ensuring that all 2.18 lakh ATMs functioned normally and their cash trays were made size-compliant for new notes in a time-bound manner.

Many Modi supporters claim that the demonetisation policy’s problems are a fall-out of clumsy implementation by the RBI and other banks. Being the Governor of the RBI, Urjit Patel owes an explanation to the Nation for making the commoners bleed and failing to plug the escape routes in time to facilitate the demonetisation gain momentum in a hassle-free manner. He has brought the RBI as an institution to disrepute and tarnished its credibility as a vehicle of fiscal management.
The opinion expressed is author’s own opinion.