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As per the finance ministry, 5.21 lakh pieces of fake currency were detected in 2011-12, up from 4.35 lakh units in 2010-11 with the majority of them in Rs500 notes. When will the RBI take a call on polymer notes?
Recently we carried a story on the history of the pioneering effect by Australia in bringing out polymer currency notes couple of decades ago. (See: What about polymer rupee notes?)
Several countries followed suit including our neighbours such as Bangladesh, Nepal, and Sri Lanka besides a host of other countries like Singapore, Chile, Indonesia, Kuwait, Malaysia, New Zealand Mexico and Brunei. It is not yet announced, but it appears some others are contemplating such a switchover from the Australian experience, which is only expected.
India has faced the problem of fake or counterfeit currency notes, mostly emanating from Pakistan, which is presumably used for terrorist activities and also to undermine the rupee for political reasons. After all, the Indian economy is strong and has a growing influence in international trade.
According to the information given by minister of state for finance, Namo Narayan Meena, as against the 4.35 lakh units of fake currency detected in 2010-11, for the period ending March 2012, counterfeit notes had increased to 5.21 lakh pieces, with the majority of them being found in Rs500 notes. Even bankers, it was reported in the press, had failed to distinguish between the real and the fake ones, as the counterfeiters had almost reached the point of perfection in fooling people with their reproduction!
In fact, in order to counter this menace, a couple of months ago, it was reported that in a pilot scheme to introduce polymer rupee notes, an unannounced entry into the market was made in selected cities like Bhubaneswar, Jaipur, Kochi, Mysore and Sheila, to test the market or public reaction.
So far, however, the Reserve Bank of India (RBI) has not yet made its findings public on this score. Nor do we know the quantum of such currency or the unit or face value.
But the crucial point is what is delaying the actual introduction of polymer rupee notes at least in the higher denomination of Rs500 or Rs1,000 as a start, as the majority of the counterfeit notes detected were in Rs500?
The government must take serious steps to implement the change. First is to establish a time frame to introduce the polymer notes and set a target date by which the entire paper currency system will be replaced. It must also target the date by which time the old paper currency will be totally withdrawn or even ‘demonetised’.
Second to gear up the production machinery that will have to be imported, most possibly from Note Printing Australia, a subsidiary of the Reserve Bank of Australia, so that indigenous supply can also be established. We must also investigate if other western or European countries are planning such a switch?
It may be recalled that Australia introduced the polymer notes in 1988 and completely switched over by 1996. The population and currency in circulation in Australia, during this period, have no bearing in size comparison with India, and it would probably take 10 to 15 years for such a switchover.
During this period, it will also give the opportunity for India to eliminate smaller coins, and replace the present Re1, 2, 5, 10 and 20 with coins, provided minting capacity is available, and possibly introduce a Rs25 polymer notes and maintaining a Rs10 polymer as well.
The third step is to ensure that we have the adequate supply of the required type of polymer from indigenous sources, machinery and technical know-how to make the required type of polymer sheets and obtain the technology to print them.
Fourth, by obtaining the collaboration from technical partner like Note Printing Australia, we must also be able to enter into long-term contract with them for continuous supply of our polymer currency notes to supplement our indigenous production efforts. It is a tall order but this can be achieved given the methodical way the RBI functions as an independent statutory body.
If and when these are done, the polymer rupee can become a totally convertible currency. These notes will have four times longer shelf life than the paper currency after which they can be recycled also.
It is time the RBI made some announcements in the progress of making the polymer rupee.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)