How to identify pre-2005 currency notes?!

This note has the year of printing clearly printed in the middle of the bottom row on the backside.

The Reserve Bank of India (RBI) has announced its plans to withdraw all currency noted issued before 2005. Financial experts believe that the move is largely aimed at removing fake or counterfeit currency embedded into the financial system as well help uncover the big black market currency in the country. While the motives of RBI are unquestionably good, there has been some quantum of confusion amongst the general public as to whether the notes they have would need replacement or not. Read on to find out if the currency notes in your pocket or ones stashed in your locker needs to be changed.

Identifying Pre 2005 Currency Notes: Currently the Reserve Bank of India prints currency notes in the denomination of Rs. 5, Rs. 10, Rs. 20, Rs. 50, Rs. 100, Rs. 500 and Rs. 1,000. All the notes printed before the year 2005 do not have the year of printing marked on it. All currency notes printed post 2005 have is year of printing clearly printed in the middle of the bottom row on the backside of the note. If your bank note has no year of printing on the back, it means the note is printed before 2005 and needs to be exchanged with the bank as per the RBI deadline. All notes with the year of printing indicated on the currency note would stay in operation as all of them are posted after 2005.

This note has the year of printing clearly printed in the middle of the bottom row on the backside.

Possible Reasons for Withdrawal: The possible reasons for the withdrawal of old currency is more to do with streamlining the number of currency variants than anything else. Of course the government is worried about the inflow of fake currency and hopes to tackle it by using all notes printed post 2015 which are far more technically superior and difficult to print for fake currency mongers.

How to Exchange Old Currency Notes: So now that you have identified your currency notes and shortlisted the ones that need to be changed, a simple exchange procedure is revealed by the press release of the Reserve Bank of India. First things first, there should be no reason to panic whatsoever as the RBI has clearly stated that all old notes would continue to be completely legal and can be exchanged at any bank after April 1, 2014.

An old (pre-2005) note without the year of printing. (RBI website)

All public sector as well as private banks have been asked to create a dedicated exchange counter where both account owners as well as non account owners of that bank or branch can exchange their old currency notes for new ones. These exchange counters will become operation from 1st April 2014.If you have a large amount of old currency notes with you, you may want to exchange them, before 30th June 2014. So why is this date important? All exchanges done before 30th June would be unconditional. For any exchange of more than ten pieces of old Rs 500 or Rs 1000 notes after that date would require identity proof and address to be shared with the bank if you are a non customer of that bank.

In Indian so far there has been no official declaration regarding the lifespan of a currency note.

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Opening a Savings account - procedure

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Fixed Deposit - Interest calculation procedure

A Fixed Deposit can be defined as an investment in which you deposit your money in a Bank for a fixed lock-in period. In return, the Bank gives you an interest at a specified rate and that interest is added to the original deposit while paying the accumulated amount to customer at the time of maturity.  Banks also give you the option of periodic pay-outs in the form of monthly and quarterly interest payments if you intend to use that interest as a source of regular income.

You can save any amount in a Fixed Deposit starting from Rs.10,000/- without any upper cap for a lock-in period of 7 days to 10 years. Some banks may also offer fixed deposits where the minimum amount may be lower.

 Interest on Fixed Deposits and its calculation

Banks offer both fixed and floating rate of interest. Fixed rate of interest is unaffected by any change in market rates and stays constant during the deposit term. On the other hand, floating interest rates vary as per the market rates and keeps changing throughout the deposit term.

For any fixed deposits below 6 months, Banks use simple interest while paying the sum at maturity. While for any deposits above 6 months in tenure, the interest is calculated using compound interest and it is compounded quarterly.

For the sake of understanding how Compound Interest which is compounded annually works, let us a simple example -

Assume you invest Rs 1000 for three years at 10%, compounded annually. Here is how the interest is calculated –

Year 1: Interest is 10% of Rs 1000 – Rs 100

Year 2: Your investment amount now is Rs 1100 ( Rs 1000 + Year 1 interest)

Interest is10% of Rs 1100 – Rs 110

Year 3: Investment amount is now Rs 1210 (Rs 1000 + Year 1 interest + year 2 interest)

Interest for year 3 is 10% of Rs 1210 – Rs 121

Total Interest for 3 years: Rs 100 + Rs 110 + Rs 121 = Rs 331

Amount – Rs 1000 + Rs 331

That gives you a fair idea how Compound Interest works. Now, when it comes to compound interest on Bank Fixed Deposits, the compounding is done quarterly.

Here is a simple formula to illustrate how it is calculated –

Let us consider the following values –

P (Principal) = 50000

R (Rate of Interest) = 9% or 9/100 or 0.09

n (compounding period) = 4

Since most Banks compound interest on a quarterly basis, we use n as 4 within the above equation to calculate annual interest and maturity amount. Similarly, if the interest compounding takes place semi-annually or monthly, the value of the compounding period becomes 2 and 12 respectively.

t (number of years or lock-in term) = 2

Inputting the values, the equation becomes

A (Amount on Maturity) =   50000 (1+0.09/4)4*2 = 59500/-

So interest is Amount – Principal = 59500-50000 = 9500/-

For better gains, it is recommended that you opt for reinvestment of interest within the fixed deposit.

Types of Fixed Deposits

The two types of fixed deposits are:

1)      Bank Fixed Deposits

2)      Corporate fixed deposits

While Bank Fixed Deposits are made with Banks, Corporate Fixed Deposits are made with companies who are looking for people to invest and fund their business.

Corporate deposits do offer a slightly higher interest rate but the level of risk is also higher. In addition, corporate deposits do not have the liquidity that Banks deposits offer and the lock-in periods will not have the same level of flexibility as available in Banks.

Tax Benefits on Fixed Deposits

Banks also offer Tax Saving Fixed Deposits as per the provision under section 80 C where the lock-in period is 5 years. Say, you have invested 1,00,000/- in a tax saving fixed deposit for 5 years. As per the provision released by the Government, you get tax benefit as per your income slab.

If you fall in the 30% income slab, you get a benefit of 30,900 bringing the effective investment down to 69,100/-. Similarly for 20% and 10% income slabs, the benefits will be 20,600/- and 10,300/- respectively.

However, the interest earned on the Fixed Deposit during a financial year is taxable and there is also ‘tax deducted at source’ when the interest is reinvested for the next year.You should also note that as an individual, you can invest the maximum amount of 1 lakh in a year.

Advantages of investing in Fixed Deposits

• Negligible risk
• Assured Returns
• Capital Appreciation
• Flexibility of parking additional capital for small terms
• Tax benefits for 5-year deposits

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Steps to protect from fraud

Sometimes criminals will create fraudulent cheques or change the name or amount of a legitimate cheque. This is known as Cheque fraud. Though a Cheque is a useful instrument for banking, if it falls into the wrong hands, it could cause you inconvenience and loss. 

There are a number of simple steps that you can take to protect yourself from cheque fraud:

• Keep your cheques in a secure location.
• Review your monthly bank statement or regularly check your transactions through online or telephone banking. Keep your contact details registered with the Bank regularly updated. If you see transactions you didn’t do or get alerts about unusual activity, notify your bank immediately and they will investigate.
• You should never sign a cheque leaf until you are about to hand it over to the person who is being paid.
• If you have to mail a cheque out or have it sent out, make sure that you cross the cheque or make it an account payee only cheque by drawing two lines at the top left corner of the check and writing ‘Account Payee’.
• If you cancel a cheque, you should dispose it off properly after crossing out the cheque number andMICR code.
• If you close your account, destroy any unused cheques.
• Consider using electronic payments such as online payments, wire transfers or direct deposit of payments.
• If you receive a cheque that doesn’t look legitimate, ask for a different form of payment.
• If you believe that you have lost a cheque, you should inform your bank as soon as possible. They could stop payment on the lost cheque by tracking down the cheque number.

It is smart to be alert about your cheque book and its contents and any cheques you may receive from someone else.

You should report to your bank immediately if you lose a cheque book or if it is stolen. Your Bank will initiate a Stop Cheque procedure on all the cheques that has been reported as lost. Your bank will then issue you a new one at a small fee or free as the case may be.

There are a number of security features already built into cheques to help prevent fraud. Banks also have the means and will try to detect fraudulent cheques, but it takes time. And it may not always be possible to do so until it goes through the cheque clearing system.

By alerting your Bank, you help your Bank take steps for damage control and to safeguard your accountfrom losses as a result of a lost cheque or stolen cheque. This will also prevent you from being held as negligent or being responsible for any loss as a result,by the Bank.


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How to fill a Cheque

A cheque is an important bank document which is used to make payments and exchange funds between people and two different accounts. A cheque book is issued by a bank to a valid account holder along with the welcome kit, when a new account is opened.

A cheque is a popular mode of banking transaction. A cheque book usually contains 5, 10 or 20 leaves. Cheque books these days already have the important details, such as the name of the Bank, branch address, IFSC code, Account holder’s name and Account Number printed on each leaf. This has made filling out a cheque, even more convenient.

Follow these steps to correctly fill up a cheque.

1. Fill in the date. This is called the date of issue.

• Mention the correct date in the top right column. It is day, month and year in figures.
• A cheque once issued is valid for the next 3 months.
• Sometimes, a cheque may require a future date to be written on it. Such a cheque is called a postdated cheque (PDC). This means that the cheque cannot be cashed until that day. People tend to write a postdated cheque because when they do not want it to be encashed or deposited before a particular date.  This is often used when one has to pay out a loan or a Monthly Instalment which will be paid out at a future date.

2. Write the name of the person/ company (Payee) you want to address the cheque to.

• Make sure you spell the name in the same way as it appears on the beneficiary’s account.
• If the name does not match, the cheque will not be valid for payment.

3.  It is advisable to strike out ‘or bearer’ at the end of the ‘payee’ line.

• This will ensure that the cheque is encashed only to the person it is addressed to and not to just anyone who holds it.

4. Write the amount to be paid in words along the ‘Rupees’ column. Strike a line after you fill in the amount in order to prevent any alteration.

5. Rewrite the exact same amount in figures within the adjacent box.

• Say to pay a sum of 1000 Rupees, write One Thousand only (in words); 1000/- (in figures) in the box.

6. Put your signature above your name to authorize the transaction. This should be the same or closest likeness of the signature specimen you have submitted to your bank while opening your account.

• The name and account number of the holder is usually already printed on the cheque leaf. If it is not, carefully write your name in BLOCK letters and enter your Account Number in the designated box.

7. Sometimes, in order to secure a cheque, you may mark out two parallel lines with ‘Account Payee only’ written in the middle, on the top left corner of the cheque. This is called ‘Crossing out a Cheque’. This means your cheque will be paid into the account of the person being paid and not to the person holding the cheque for payment at the counter.

• Follow this carefully to direct the amount transfer into the account of the right Payee. It is an important step to safeguard your money.

8. To cancel a cheque mark ‘CANCEL’ in bold across the face of the cheque and if possible, inform the bank officials or make a note of the cheque number and record it as cancelled. You should also mutilate the MICR code of your cancelled cheque or shred the whole cheque. You should additionally scratch out your signature on the cheque.

A correctly filled out cheque would look like the image below.

Do remember that you cannot make any changes / corrections to a cheque that you have filled in. Any overwriting will render the cheque invalid.

Every chequebook has a record sheet where you can note down the details of each cheque you have issued. It is a good practice to keep a record by duly noting down the transaction details such as the payee name and his/her contact number, cheque number, date and amount. Such information are crucial should you require to stop a payment or to check if there is an unauthorized withdrawal.

A cheque is valid only when filled in with correct details including the date, name of the payee, amount specified in words and figures and duly signed by the account holder. A cheque is a sensitive and an important document for your banking purposes, hence should be kept safe. You should sign a cheque only when you are ready to issue it. This is to prevent the unauthorized use of your cheques in the unfortunate event of losing your chequebook in which case, pre-signing your cheques would ease unauthorized usage of your cheques and would amount to carelessness on your part as a customer.

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