Tracing serial numbers: How PM Modi plans to hunt down rogue bank managers

Agencies will start tracing seized currency from their serial numbers to identify bank branches

The common link between most of the seizures of new currency notes across India has been an errant bank manager often willing to help out select clients by providing them with new notes beyond the conversion limit set by the government. Rogue bank managers across India have also helped influential and wealthy people convert their undeclared wealth into new currency. This even as millions of honest Indians stand in serpentine queues only to be turned away by banks claiming to have run out of cash. The involvement of bank managers came to the fore during raids on Chennai-based miner Shekhar Reddy, Delhi-based lawyer Rohit Tandon and Kolkata-based businessman Paras Lodha. The Enforcement Directorate has also found out that four banks had allegedly helped legalise Rs 150 crore in unaccounted money across the country. 

Sources have revealed that in addition to arrests of bank officials, including those of the RBI already made, investigators have fast tracked the process of swooping in on more. Investigators have recorded the serial numbers of all seized notes which will now be tallied with the records maintained at the currency chests and link branches of various banks across the country. 

Bank sources say that there is a procedure in place to identify notes at the originating bank. Ideally, the RBI issues fresh currency to banks with currency chests after receiving indents from their respective link offices. The boxes containing parcels of the money are then sent to respective currency chests through an RBI representative referred to as the Potdar. The parcels are counted without opening the polythene packing in presence of the Potdar and the escort party which comprises a policeman and other staff. Once the parcels are weighed, checked for damage, the police escort is relieved after he puts his signatures on the invoice. The counting of currency is then done at the rate of 3 lakh notes every day in presence of the Potdar. Once the counting is completed at the chest, a fax is immediately sent to the RBI confirming the receipt. After the Potdar leaves, all cash operations involving sorting and weighing of currency are recorded on CCTV. These CCTV recordings are meant to be preserved for a minimum of 90 days by the respective currency chests. Each currency chest is equipped with the following: ultra violet lamps, weighing machines, dual display counting machines, shrink wrapping and note sorting machines. 

Before the Potdar leaves, the currency chest branches complete a statement that has the following details: date of receipt of the money, pieces and value of the currency received, date of examination, number of notes examined during the day and the reasons (if any) for not examining any of the notes. 
 

Investigators reveal that they are examining the role of Potdars and security men to ascertain if currency leakages happened before the money reached currency chests. They are also examining collusion between officials at currency chests and Potdars to figure out if currency was diverted during chest operations. These clues were provided when the Central Bureau of Investigation (CBI) arrested and questioned K MIcheal, a senior special assistant with the RBI earlier this month. Consequently, two more RBI officials have been arrested in Bengaluru for allegedly helping people convert almost Rs 2 crore of old currency into new notes without any regard to rules. 

Investigators say that the RBI’s late reaction time has made things more difficult. It was only on December 12, more than a month after demonetisation, that the RBI issued a notification asking banks to maintain an appropriate reporting system to keep track of the issuance of new notes from currency chests. It was only when investigating agencies swung into action that the RBI asked link branches and currency chests to maintain “daily record of issuances” that show the serial numbers of the notes issued from various bank branches. 

Investigators are trying to back trace the seized currency and match them with these records to ascertain from which banks were these notes were leaked. The managers and other senior officials of these branches will then be questioned by investigating agencies. These records of the serial numbers of the notes have to be preserved for two years. It is not clear what prompted the RBI to issue a notification after much time had elapsed. Sources said that not all bank branches maintained such records before the RBI’s direction. This has limited the scope of investigations to accurately ascertain leakages from branches before December 12. 

But there are also extensive CCTV recordings at banks. According to RBI’s direction, banks have to record and preserve footage between November 8 and December 30. However, these recordings only cover the bank hall area and counters. With daily reports of massive seizures across India, currency leakages and illegal conversion seems to have happened beyond just the areas where customers queued up. 

With PM Modi exhorting in his last Mann Ki Baat programme of the year that the corrupt will not be spared, investigators are already on the job. But their job is not easy. It involves not just  tracing serial numbers of seized currency but also examining video recordings at suspect branches to nail corrupt bank managers who manipulated the system to help influential people even as ordinary people bore the initial brunt of demonetisation.