To pay his son's school fees, Suryabhanu Pratap (name changed) withdrew Rs 5,000 from his private bank's automatic teller machine. A day later, the school called him to inform that they had found four fake Rs 500 notes in the amount deposited.

"I was scared and felt completely humiliated," says Pratap. He quietly went back to the school next day and exchanged the notes. Why didn't he inform the bank or the police?

Reading the signs

Serial numbers are printed with fluorescent ink, which can be seen when viewed under a ultraviolet lens

Floral design on the left side - half the denomination of the currency will be printed on the front side and the other half on the back side. If seen against bright light, the complete denomination appears

Just below the floral print, a mark is made in intaglio (a kind of printing, where the image is slightly raised) for the visually-impaired to identify the denomination. For the Rs 500 note, the mark is a circle, for the Rs 100, it is a triangle and a square for the Rs 50

Similarly, a portrait of Mahatma Gandhi, the RBI seal, a guarantee and promise clause, a Ashoka Pillar emblem on the left and RBI Governor's signature are all printed on intaglio

A band printed on the right side contains a latent image of the denomination of the banknote. The numeral appears when the currency is held horizontally at eye level

A wide security thread with inscriptions "Bharat" in Hindi and "RBI" runs through the banknote. The thread fluoresces on both sides in ultraviolet light

"I had no way to prove that the money was withdrawn from the bank ATM. I also did not want to get involved in any police investigations," Pratap claims. The notes were torn and thrown in the nearest ditch - a loss of Rs 2,000.

Banks, on their part, said that that it is in the "rarest of rare cases" that someone finds counterfeit notes in the money withdrawn from an ATM. "The notes to be deposited in the ATM go through a series of checks to be ATM-fit. Counterfeit currencies, if any, are detected during these checks," said Jitendra Balakrishnan, deputy managing director, IDBI Bank. However, though banks keep the record of the serial numbers of new notes being put into the machine, there is no record of older notes.

There has been huge rise in the number of counterfeit notes in the last one year. According to recent RBI data, the value of fake currency detected in 2007-08 rose by 137 per cent to Rs 5.5 crore (Rs 55 million) from 2.4 crore (Rs 24 million) in the previous financial year. And for hapless victims like Pratap, there is nothing much that can be done.

"The police can investigate with the bank only if the notes are in a series," Robin Matthew, a criminal advocate, says. Since the possession of fake currency is a criminal offense, even the possession of a single note can lead to serious trouble.

So what should you do when counterfeit currency is encountered? A senior RBI official says, "If the currency notes have come from the bank, either from an ATM or direct withdrawal, the customer should lodge a police complain and mention the source of the currency." After that, the currency is either destroyed or sent to RBI for further investigations, if the police are unable to establish the bank as the source.

When banks find counterfeits during a deposit, the teller confiscates it and destroys it in front of the customer. Later, an application is filed at the local police station giving the details of the currency and customer details, according to KVS Manian, group head, retail liabilities and branch banking, Kotak Mahindra Bank [Get Quote].

An official letter is sent to the customer, whose notes have been destroyed, with the serial numbers. There is no mechanism to ensure that the customer gets his money back and nor are there any guidelines or rules to protect the customer from this problem. "The game is all about passing the buck. So, whoever is in possession of the fake currency, is the culprit," a senior banker said requesting anonymity.