At a meeting last month, the RBI Central Board recommended designs for a new banknotes series to the government. A key reason for proposing the new series is that India remains a cash-based economy, and fake currency notes continue to be a huge menace.
How big is the fake currency problem?
As many as 250 out of every 10 lakh notes in circulation are fake, according to a study conducted by the Indian Statistical Institute. Typically, at any point in time, banknotes with a face value of Rs 400 crore are in circulation in the country. The study revealed that fake currency notes with a face value of Rs 70 crore are infused into the system every year, and law enforcement agencies are able to intercept only a third of them — a fact that is acknowledged by the agencies themselves.
The detection rates of fake 100- and 500-rupee notes were found to be about the same or 10% higher than the detection rate of 1,000-rupee notes. The study added that fake 1,000-rupee notes constitutes about 50% of the total value of fake notes.
How do these notes find their way to India, and who profits from them?
Pakistan’s military spy agency, the Inter-Services Intelligence (ISI), has been raking in an annual profit of around Rs 500 crore by circulating counterfeit notes in India, according to a report prepared by the IB, R&AW, Directorate of Revenue Intelligence and CBI.
The ISI has been making a profit of 30-40% on the face value of each counterfeit Indian note produced in Pakistan, according to the report. The cost of printing a Rs 1,000 counterfeit note, for instance, is Rs 39 (the RBI spends Rs 29 to print a Rs 1,000 note), but it is sold at Rs 350-400, according to the report. The total fake notes that came into India in 2010 from abroad was pegged at Rs 1,600 crore, and going by this estimate, the report put the ISI’s total profit at Rs 500 crore.
What has been the government’s track record in intercepting these notes ?
According to data submitted by the Home Ministry to Parliament on May 3, there has been a slight decrease in the circulation of fake Indian currency notes (FICN) in the country in the three years beginning 2013. In calendar year 2015, investigative agencies and RBI seized and recovered 6.32 lakh fake currency notes with a face value of Rs 30.43 crore. While the number of fake Indian currency notes was down 10% from a year ago, in value terms, it was down 15% in the same period.
In 2015, various agencies filed 788 FIRs in cases of smuggling and circulation of FICN, in which at least 816 people were accused. Data show that Delhi and Uttar Pradesh together accounted for over 43% of recovered and seized FICN in 2015.
What has the government done to tackle this problem?
The government has formed a special Fake Notes Co-ordination (FCORD) Group in the Home Ministry to share FICN information with security agencies of states and the Centre. It has also constituted a Terror Funding & Fake Currency Cell (TFFC) in the National Investigation Agency to investigate terror funding and fake currency cases.
Under the Unlawful Activities (Prevention) Act, 1967, effective from February 1, 2013, damage to the monetary stability of India by production, smuggling or circulation of high quality fake Indian paper currency, coin or any other material has been declared an act of terror.
Apart from this, the government in August 2015 signed an MoU with Bangladesh to prevent the counter-smuggling and circulation of fake currency notes. This, after it found that smugglers were increasingly using the India-Bangladesh border to smuggle in FICN. Under the MoU, the two countries will share intelligence on such cases.