The Reserve Bank will compensate banks 25 per cent of the losses for reporting of counterfeit bank notes of Rs 100 and above to it and other authorities.

“It has been decided to compensate the banks 25 per cent of the loss incurred in respect of counterfeit notes of Rs 100 and above detected by them and reported to RBI and Police authorities,” RBI said in a notification.

RBI further said that these instructions have become effective from July 1, 2013 and the banks should commence reporting to RBI from August 2013.

To address the menace of counterfeit notes, the central bank in its monetary policy statement had said that banks will be incentivised for reporting of counterfeit notes detected by them.

RBI has also asked the banks to ensure that the notes received over the counters are re-circulated only after ensuring that proper authentication is done through machines.

To detect counterfeit notes at bank or branch level itself before putting it into circulation, banks are required to process notes of Rs 100 and above denomination through machines as per the standards prescribed by the RBI.

According to RBI data, as many as 69.38 billion counterfeit notes were in circulation in 2011-12 and of these as many as 27.84 billion were of Rs 100 and higher denomination.