Citizens' Issues
Counterfeit currency—the new pandemic

The “funny money” problem in India is no longer a minor bump; it is severe, it is suspected to be much more than the readiness to blame ISI of Pakistan, and requires a total overhaul of the laws pertaining to counterfeit currency

I usually pay for fuel by card at my regular filling station, but needing some at an unfamiliar pump at a remote location outside Delhi a few days ago, chose to pay by cash. What came out of the wallet first was a brand new thousand rupee note, which I handed over to the attendant. He looked at my unkempt hair, dirty clothes and the dented and highway dust-encrusted car, and then I saw some hesitation in his eyes, he then looked at the mint condition of the thousand rupee note again, and asked me if I didn’t have a used note, or hundred rupee notes, or would I not want to use my card instead?
Has something like this happened to other people, too?
The seizure by the Indian authorities in Delhi of Rs6 crore worth (or much more, according to another source) of counterfeit Indian currency, apparently in mint condition and reportedly brilliantly perfect in all respects when compared to the real currency, finally proves what the grapevine has known and whispered about all the time. That the “funny money” problem in India is no longer a minor bump; it is severe, it is suspected to be much more than the readiness to blame ISI of Pakistan, and requires a total overhaul of the laws pertaining to counterfeit currency, amongst other things.
As background, being seafarers, we were always aware of as well as taking precautions on getting saddled with fake currency notes globally. Junk value East German marks being passed off as hard currency West German marks was something all of us had been warned about, but it still did not prevent traders trying to palm them off on us, in all parts of the world. Shipping Corporation of India owned and operated a passenger ship named ‘CHIDAMBARAM’ of all things, which was well known for being used by fake currency smugglers from the Far East into ports along our East Coast.
Oh yes, we developed a nose for this stuff early on in life, when most people our age were still surviving on pocket money from their Mummy-ji and Papa-ji. We got stuck with bad money, we had no mummy-papa; we were in trouble—simple as that.
In addition, the Goa-Karnataka-Maharashtra triangle, roughly bordered by Kolhapur on one side and Hubli-Dharwad on the other, was made famous by Telgi of Khanapur fame—the business here of fake currency notes being a legacy of the colonial ex-rulers of Goa and the politics therein. Likewise, the opening up of land borders in Rajasthan, the rapid growth of private ports in Gujarat, the shift in opium trade patterns and most of all, the rampant growth of this ‘business’ in the border districts of Uttar Pradesh adds to the ‘traditional’ suspect routes from the Persian Gulf and Far East countries. Add the hill tracts and delta of the Padma to this, and you suddenly have a situation where the attack from all sides is now really serious and terrible for the nation.
So far, however, it was in the realm of people in the cash business, the black economy.
But now, it appears to be reaching the corporate world too—DeLorean was one example of a top-end business-person who got mixed up in the narcotics and counterfeit currency business to try and rescue his business. Closer home, the activities of Ponzi schemes of the SpeakAsia sort as well as assorted ‘savings schemes’ offering high rates of return barely hide the role of counterfeit money being used for pay-outs, what better way of spreading this currency wider?
And then, with the ongoing slowdown impacting droves of first generation business-people nationwide, the lure as well as squeeze of using funny money to get out of sticky situations is reaching epidemic proportions. One ‘system’ doing the rounds apparently works like this, if you are a businessman who is in debt, and wants to bail out, then the loan sharks you owe money to approach you, put the squeeze on you, and you:-
1) Provide some sort of collateral, say Rs5 crore worth of property, gold, or anything tangible. Use that to get liquidity of genuine money, white or black. This amount is used for a supposedly genuine purpose and sent out of the country.
2) The genuine funds now sent out are ‘invested’ in funny money with a “face value” to the tune of about two-and-half to three times this amount.
3) After 45-60 days, once the ‘shipment’ is received, the original collateral is returned, along with an equal amount which is adjusted against the debt.
4) The rest of the profits are also kept by the people running this racket.
5) All this is in counterfeit money.
Obviously, such things are not cast in stone, but this is broadly how it works. The risk with the genuine collateral, of course, is if things go wrong. The counterfeit currency gets out into circulation by one means or the other—and here too—the role of a variety of private agencies in the business of stuffing of ATMs as well as currency chests in some parts of the country are not above suspicion.
The bigger issue here is that the law as it stands today makes a criminal out of the person who is the last in the chain, usually the innocent citizen saddled with a dud currency note, even if he took it out of an ATM a few minutes ago. That is the major change needed, if we really want to fix the issue, especially as the nation heads towards elections. Things are so bad that some young people who got in touch with this correspondent to develop their own counterfeit detecting machine were simply unable to do so, because the risk of running trials on real fake money were too high for them.
We have to change the laws, those who find counterfeit money ought to have the legal protection if and when they approach the authorities, instead of being prosecuted, as things stand with the current dispensation. Or we shall see even bigger seizures taking place.
 (Veeresh Malik started and sold a couple of companies, is now back to his first love—writing. He is also involved actively in helping small and midsize family-run businesses re-invent themselves. Mr Malik had a career in the Merchant Navy which he left in 1983, qualifications in ship-broking and chartering, a love for travel, and an active participation in print and electronic media as an alternate core competency, all these and more.)

Previous articles on the subject, at Moneylife:




5 years ago

A suggestion that has been going around for over a decade is to encourage greater use of credit/debit cards for payments esp towards capital and white goods. This would have meant reduction in need for paper money , faster and better collection of indirect taxes and countering the fake money problem. It may be worthwhile giving a minor tax rebate if payment is made by card. What can be preventing the govt from implementing this?


5 years ago

in this country, full of miles of rules & regulations, common sense is never used by those who are running the SHOW!

all countries have problem of counterfeit notes. but sensible ones know how to deal with problems. this stupid country, run by senseless people, dont even know what to do with any problem! but they are world champions, with no competition even from hard core communists like north koreans & burmese,

take the new coins! senseless honchos in a country of 1.2+ billion have no tenacity to even think HOW THE HELL THEY CAN MINT NEW COINS OF RE.2 LIKE OLD RE.1 AND RE.1 LIKE OLD 50 PAISE?!?!?





5 years ago

Our govt. and the top bureaucracy are indeed not so naive as to feign ignorance of how and where all this is emanating. This is no ordinary, petty crime-this needs well organised, state-of-the-art technology and hence huge investments and only the most influential can operate as the kingpins. The people caught are essentially expendable and mere carriers. The real problem in India is that the wellmeaning nd honest are not assigned the task to keep watch on the elements becoming rich suddenly, overnight. One should not be surprised to know that many top bureaucrats also enjoy the benefits of this racket, may be unknowingly. Politicians, of course, are very much in the loop of the "gang".



In Reply to A B 5 years ago

Dear AB, thank you for writing in, and as the saying goes - one small candle lights a corner of the room.

We keep trying.



5 years ago

Well... The prevalence of the black economy and participation by the very people who are not supposed to be part of it, prevents the authorities in India from taking any concrete steps to reduce the menace. The solution lies in electronifying payments across the country - and making it compulsory in semi urban and urban areas above a certain limit, say INR 1,000.

This obviously requires that people working in the unorganized sector are given their salaries or wages by way of electronic transfer and that people pay for their purchases by way of electronic transfer.

This is hampered by the high and multiple tax structure of our economy.
Our tax rates need to be rationalized and divided amongst more people. The successive governments have played populous cards to the hilt while milking existing tax payers.

Municipalities, states and central government taxes need to be setup in such a manner that the citizenry pays for the facilities they provide in a consistent fashion and in return are guaranteed good quality goods and services. The size of our populatio means that we do not high tax rates, we need more spread of tax payers.

Possibly all of this is utopian as our lawmakers have consistently muddled the waters by their explicit participation in the black economy. Schemes like NREGA, FSA, etc point to a controversy where they want to hand out fish to people without trying to teach them how to fish. If the same quantum of money is spent on improving the quality and increasing the spread of public schools by paying teachers fair salaries, India would be a changed country in a decade. Obviously this would result in slogans like GARIBI HATAO rendered pointless!!

You can imagine how everything is interlinked and how weakening institutions like police or bureaucracy through corrupt means has resulted in threats like counterfeit currency circulation amongst many others.



In Reply to Jingoindian 5 years ago

Dear JingoIndian ji . . .

Your well thought out response is highly appreciated.

Question arises - what can we do next, please?


Shadi Katyal

5 years ago

For years we heard the fear of CIA which turned out to be not that bad but our own fear. Now we have ISI and it is scaring the pants of us. In every aspect ISI is involved and we are just impotent to do anything.
For years counterfeit Stamp Paper has been sold by GOI without knowledge that her printing machines were sold and later the ink but what has govt done so far. What happened to the person involved.
One should ask how does all this happens only in India and why is India allowing ISI to furnish such counterfeit currency. We never hear any action being taken but just a small news.Pakistan can print Indian currency as can India or Paksitan so who is topping us to not furnish such currency to Paksitan..
Are we sure that like the Stamp paper this is not another in-house game being played???



In Reply to Shadi Katyal 5 years ago

Dear Shadi Katyal ji,

You are absolutely correct, and thank you for placing it so clearly.

One can be forgiven for thinking that certain elements who want the elections and therefore the selection of our lawmakers to go in a particular direction may well be behind this racket of counterfeit currency.


govind shanbhag

5 years ago

Veeresh Jee - God forbid - if you deposit one forged currency note of any denomination and so called expert bank official/teller was lucky enough to detect the forged note (of course to your ill luck) you had it. The procedure is customer who had deposited the note is not allowed to leave the bank and bank has to confiscate the note immediately. Then a sort of panchanama is required to be made and the bank official has to rush to nearest police station alongwith the customer. with the forged note after reporting the matter to currency derpartment of RBI. In Police station you are looked upon as a member of gang (they always feel so), keep you in the police station till evening and if you are lucky statement is taken on the same day. If concerned police official is required to some urgent such as escorting a politician some where, your full address, identity proof is taken and you are called on next day. You have to keep on visiting police station no.of times to lodge the complaint and ultimately you prefer to settle the issue once for all by pay something (much more than forged note). With such experience next time if you happen to get another forged note and caught, you and bank officials prefer to destroy the note rather than entering into laid down procedures. You are absolutely right, innocent customer who may have received the note in usual transaction is required to suffer.



In Reply to govind shanbhag 5 years ago

Dear Govind Shanbag ji,

Thank you for writing in.

Yes Sir, I am aware of the tribulations faced by ordinary people if caught with counterfeit currency, even when it is not their fault. There are some letters on the subject in the previous articles listed here which bring this out.

We must do something to change this, and it has to come from the people.

Good luck to us.



5 years ago

The crooks and certain underworldorganisations are creating conuterfeit currenceis of higher denomination. The only way to check them is examining the notes through machines .Another way is RBI should discontinue the present currency notes and insted issue fresh notes and discontinue the old notes .Genuine old notes should replaced from all banks and with records of the people upto certain amounts fromthe counters biger amounts should be credited to the bank accounts. This will also help to reduce the black money as the person exchanging the old notes have to give proper identification andwhen the amount involved is heavy sources can be asked and checked This will reduce the black money



In Reply to PCChacko 5 years ago

Dear PC Chacko ji,

Thank you for writing in.

The technology to "trap" counterfeit currency at various points along the transactions, for example at point of receipt in banks/ATMs/Post Offices, at point of dispensing in banks/ATMs/Post Offices, and at other high-cash transaction locations, exists and is not all that expensive either.

Why it is not utilised would be interesting to learn about.


IPO Crackdown-2: Brooks Laboratories

SEBI has asked Brooks to call back the ICDs advanced by it to certain entities and together with all the IPO proceeds deposit it in an interest-bearing escrow account. Investors are not getting back their money yet; but the curious fact is that investors to these dubious IPOs don’t seem to be demanding a refund of their application money either

(This is the second part of a series of articles on SEBI’s regulatory action)

Brookes Laboratories’ (Brooks) chairman Atul Ranchal, managing director Rajesh Mahajan and six others, including the merchant banker D&A Financial Services (DAFS) have been barred from the capital market by the Securities & Exchange Board of India (SEBI) as part of its crackdown on seven companies.

Brooks, a Himachal Pradesh-based pharmaceutical contract research and manufacturing services (CRAMS) company is among those whose initial public offering (IPO) came under the regulatory scanner due to price manipulation and other irregularities.

On 16 August 2011, Brooks launched an IPO to raise Rs63 crore at Rs100 per share. The primary objective of the issue was to set up a manufacturing unit at JB SEZ Pvt Ltd, Panoli, Gujarat, for manufacturing of various pharmaceuticals formulations and to meet long-term working capital requirements, some of these which included paying off “questionable” inter-corporate deposits (ICDs).

The discovery that an entity called Overall Financial Consultants Pvt Ltd (OFCL) had bought and sold 6,65,000 shares raised a red flag and triggered SEBI’s investigation which exposed a conspiracy between Brooks and other entities to siphon off public money.

1) SEBI investigations showed that as many as 12 entities were involved in routing and masking the transfer of IPO funds from Brooks to OFCL. They used ICDs to transfer Rs2.5 crore to OFCL, which had run up losses of Rs2.13 crore by trading in the Brooks scrip.

The brazen manner at which the IPO monies were routed is described below:

A firm called Shardaraj Tradefin received Rs50 lakh from Brooks as repayment of ICDs, of which Rs25 lakh each was transferred to two entities namely Makesworth Projects & Developers Pvt Ltd and Shridhan Jewellers Pvt Ltd. These entities then transferred Rs25 lakh each to OFCL.

Similarly, another entity, Konark, received Rs5.50 crore of the IPO monies towards repayment of ICDs from Brooks. Konark then transferred the entire amount to Mangalmayee Hirise Pvt Ltd. Thereafter, Mangalmayee transferred Rs25 lakh to OFCL, and a further sum of Rs1.50 crore to Khusboo Complex Pvt Ltd, Rs50 lakh each to Growfast Realties Pvt Ltd, Jaganath Consultants Pvt Ltd, Silicon Hotel Pvt Ltd, and Neelkamal Dealcom Pvt Ltd, and Rs25 lakh each to Alishan Estates Pvt Ltd and Pushpanjali Hirise Pvt Ltd. These entities then in turn transferred Rs25 lakh each to OFCL.

The graph below illustrates the above transactions: (Source: SEBI)


2) Brooks never disclosed one telling fact—the relationship between the entities—and chose to hide it from the public at large. Out of the 13 companies which had ICDs with Brooks, seven of them had common directors. Even the entities involved in diverting the IPO funds had common directors between them. For example, three companies namely Shardaraj, Makesworth and Shirdhan all had common directors. Some of them even shared the same addresses. This is also case of shoddy due diligence or collusion by the merchant banker.

3) Brooks engaged itself in improper business practices with a supplier. It transacted with a Dubai-based supplier, Neo Power, for the purpose of acquiring machinery, using pro-forma invoices received through e-mail instead of properly signed papers. What is stark was that Brooks overstated the price of the machinery in its prospectus. Instead of Rs19 crore, as mentioned in the prospectus, the price of the machinery transacted turned out to be Rs14 crore. The company had, in fact, already paid 50% of the cost of machinery and had neither mentioned the supplier’s name nor this payment in the prospectus. In a sinister twist to this transaction, even after five months since Brooks placed the ‘order’, the machinery is yet to be delivered. Simply put, Rs5 crore had been siphoned off by merely mis-stating just one item in the prospectus.

4) Parag Dinesh Doshi, the signatory of the faux proforma and CEO of Neo Power, is also the director of Hillston Advisors, one of the 13 companies that lent funds through ICDs to Brooks. Apparently, Mr Parag’s relative, Dinesh Doshi is also a director of 10 different companies that are currently under SEBI scanner. In order to escape SEBI’s radar, Dinesh Doshi resigned from Hillston Advisors on 27 October 2010.

5) Brooks had lied in its prospectus that it intended to set up a factory in JB SEZ in Gujarat. What happened was that Brooks paid for plant and machinery and also for civil work contract even though the acquisition of land has still not been completed.  Despite lack of infrastructure, Brooks proceeded to place orders for machinery from Neo Power.

6) Apart from using ICDs for routing and diverting investors’ money, it also abused ICDs in a clever way. The funds raised from ICDs were paid to related entities from whom the ICDs were originally received in the form of advances for equipment, project management fees, etc, while at the same time paying the original ICD providers also from the issue proceeds.

So far, SEBI has asked Brooks to call back the ICDs advanced by it to certain entities and together with all the IPO proceeds deposit it in an interest-bearing escrow account with a scheduled commercial bank. Investors are not getting back their money yet; but the curious fact is that investors to these dubious IPOs don’t seem to be demanding a refund of their application money either.




K B Patil

5 years ago

We Indians are too passive even when our interests are directly hit. For instance, a clean stockmarket is in the interest of all investors. Yet, even four days after this article is up, investors dont seem to be doing anything, not even commenting on the murky goings on in IPOs. Apathetic investors do not deserve a clean market.

Share prices to move in a range: Friday Closing Report

Nifty to trade between 4,830 and 4,915

Optimism in the global arena following successful bond auctions in Spain and Italy eased some concerns in Europe and helped most Asian markets see gains. The Indian market also cheered the outcome, but pared some of its gains in late trade. Since the past four days (including today) the Nifty almost reached its second level of resistance, however, it was not able to maintain itself above that level. Today the index rose on a huge volume of 83.27 crore shares on the National Stock Exchange (NSE). From here we may see the benchmark making a range-bound move between 4,830 and 4,915.

Supportive cues from the global area helped the domestic market open higher today. Markets in Asia were mostly in the positive following the European Central Bank’s decision on Thursday to keep interest rates unchanged and good response to the Spanish and Italian bond auctions. Back home, the Nifty gained 31 points to resume trade at 4,862 and the Sensex opened at 16,145, up 107 points over its previous close. Across-the-board buying by institutional investors supported early gains.

A minor bout of profit taking in late-morning trade saw the indices dip to their intraday lows. At the lows, the Nifty fell to 4,834 and the Sensex went back to 16,050. But select buying pushed the market higher in subsequent trade.

Buying interest in metal, capital goods and realty sectors and a positive opening of the European indices enabled the market hit its intraday high around 1.50pm. At the highs, the Nifty touched 4,899 and the Sensex scaled 16,257.

The market pared some of its gains in post-noon trade but ensured a green close. At the end of trade, the Nifty settled 35 points higher at 4,866 and the Sensex gained 117 points to 16,155.

The advance-decline ratio on the NSE was 1248:586.

The broader indices outperformed the Sensex today as the BSE Mid-cap index climbed 1.14% and the BSE Small-cap index surged 1.44%.

The key gainers in the sectoral space were BSE Metal (up 3.21%); BSE Capital Goods (up 2.86%); BSE Power (up 2.39%); BSE Realty (up 2.12%) and BSE PSU (up 1.55%). BSE Consumer Durables (down 0.40%); BSE Oil & Gas (down 0.38%) and BSE IT (down 0.04%) settled lower.

Tata Steel (up 7.11%); Coal India (up 5.56%); Larsen & Toubro (up 3.84%); NTPC (up 3.11%) and Jindal Steel (up 3.07%) topped the Sensex list. GAIL India (down 3.19%); Bajaj Auto (down 2.96%); Maruti Suzuki (down 1.79%); Hero MotoCorp (down 1.25%) and Sun Pharma (down 1.18%) were the main losers.

The Nifty was led by Reliance Power (up 7.22%); Tata Steel (up 6.97%); Reliance Communications (up 6.34%); Coal India (up 5.02%) and NTPC (up 3.51%). The main losers on the index were GAIL (down 3.27%); Bajaj Auto (down 3.09%); Maruti Suzuki (down 1.91%); HCL Technologies (down 1.79%) and Sun Pharma (down 1.73%).

Markets in Asia, with the exception of China and Taiwan and Malaysia, closed with gains on the last trading day of the week on optimism from Europe after a positive response to the government bond auctions in Spain and Italy on Thursday.

The Hang Seng rose 0.57%; the Jakarta Composite advanced 0.66%; the Nikkei 225 surged 1.36%; the Straits Times jumped 1.75% and the Seoul Composite climbed 0.60%. Among the losers, the Shanghai Composite declined 1.34%; the KLSE Composite fell 0.16% and the Taiwan Weighted shed 0.07%. At the time of writing, the key European markets were trading with gains of 0.36% to 0.93% and US stock futures were trading higher.

Back home, foreign institutional investors were net buyers of shares totalling Rs506.80 crore on Thursday. On the other hand, domestic institutional investors were net sellers of equities aggregating Rs996.91 crore.

Wind turbine maker Suzlon Energy today said its German subsidiary REpower has signed a contract to supply 10 wind turbines to England-based RWEnpower Renewables for the Bradwell wind farm. The turbines, with an output of 2.05 MW each, will generate enough electricity to power the equivalent of nearly 12,000 homes annually, Suzlon said in a statement. The stock jumped 9.93% to close at Rs22.70 on the NSE.

Glenmark Pharmaceuticals today said an arbitration panel in the US has granted an interim order prohibiting Napo Pharmaceuticals from terminating their collaboration agreement for diarrhoea drug Crofelemer till the panel decides the arbitration. Glenmark gained 3.26% to close at Rs314 on the NSE.

Diamond Power Infrastructure, an integrated player in the power equipment and EPC segment, on Friday said that it has received orders totalling Rs48.30 crore for supply of 108 power transformers to diverse customers. The stock advanced 5.12% to settle at Rs110.90 on the NSE.


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