While we should welcome the move made by the RBI to combat the fake currency racket, we must debate their methodology adopted in test marketing of polymer rupee currency notes

In the past few months, Moneylife has carried reports on the urgent need to implement policies relating to replacement of paper currency notes by polymer-based currency, akin to what many leading countries like Australia, Singapore etc. have introduced. As our readers know, Australia was the pioneer that introduced polymer-based currency notes more than 25 years ago; these have long shelf life, compared to less than four years for paper base, and cannot be easily faked.

After a lot of deliberation, the Reserve Bank of India (RBI) took the first major step in test marketing of Indian polymer currency notes. In fact, a field trial was carried out in Jaipur, Shimla, Bhubaneshwar, Mysore and Cochin. These locations were selected based on geographical and climatic conditions.

According to the Minister of State for Finance, Namo Narain Meena, Rs10 denominated polymer plastic notes were introduced to the above market on trial basis. We now have the figure that a billion Rs10 notes were printed and put into circulation in the five centres mentioned above. So far, the results of the field trials carried in these towns have not been made public by RBI, and in fact, not much publicity was given to this attempt, and so the aam aadmi uses the currency in the normal fashion!

While we should welcome the move made by the RBI, we must raise and debate the methodology adopted in test marketing. First and foremost is that the actual counterfeit notes in circulation in the country are in high denomination, such as Rs500 and Rs1,000 notes. From time to time, bulk quantities have been seized from couriers and smugglers from across the border from Bangladesh and Nepal.

Press reports indicate that in 2010 about Rs1,500-1,700 crore worth of fake Indian currency notes (FICN) were smuggled into the country; this increased to Rs2,500 crore in 2012, and so far, up to July 2013, as much as Rs1,200 crore have been caught. How much of these escaped the watchful eyes of the security agencies is difficult to even imagine.

First step from RBI, one would expect, is to announce that they intend to switch over to polymer plastic currency within a particular time frame. If this is considered as letting the cat out of the bag, then, without much publicity, we ought to introduce these polymer based currency notes in high value of Rs500 and Rs1,000. Within a scheduled time frame, we need to mop up the paper currency of these denominations and replace them totally. Only then the FICN can be prevented from entering the country.

This is particularly very important, considering the fact that elections are a few months away from now. Large scale smuggling of fake currency notes is more likely to increase than before. In this connection, it is worthwhile noting, with alarm, the reports on this subject by the National Investigation Agency (NIA).

NIA has now conclusive proof that these fake currency notes are the handywork of the ISI of Pakistan, whose main purpose in pushing these notes to destabilise the Indian economy and to finance its terror operations in India. These fake currency notes are routed through Bangladesh, Nepal; and now, the new and additional locations are UAE, Oman, Singapore, Malaysia, Thailand, Hong Kong and Shenzen (China).

The NIA has carried forensic analysis of the captured fake currency notes. It is observed, beyond reasonable doubt, that the paper used matches with the legal tender of Pakistan. Besides, they match almost all the security features and print Rs500 and Rs1,000 notes, and that these fake notes can be only duplicated by highly sophisticated machines that the Government of Pakistan owns.

The perfection of window and water mark formulations indicate that the FICN paper on regular currency making machines can only be owned by a sovereign country or state. “Most of the pivotal parameters of the paper like density (GSM) wax pick quotient, poly vinyl alcohol and PH values were found matching with the legal tender of Pakistan” according to NIA.

All these details have been made available to the Parliament Standing Committee and concurred by Research & Analysis Wing (RAW), the Intelligence Bureau and the Department of Revenue Intelligence (DRI). The matter is therefore, very serious and urgent steps should be taken not only by RBI in expediting their planned action to introduce polymer Rupee notes in higher denominations but also the Security agencies all over the country, particularly, on the land borders to totally stop smuggling of the fake currencies notes.

Moneylife would concede that RBI may be tight-lipped on the issue of their plans but after having received the test market reaction, time has now come for large scale plans to pump in trillions of dollars worth Rs500 and Rs1,000 polymer notes and demonetise the paper currency of the same denomination to nullify the effect of fake currency notes. Admittedly, a large quantity of fake currency notes has been "found" by bankers, who have been advised to withhold them to prevent further circulation.
 

As a word of caution for overseas travellers to the above destinations, it would be in their own interest neither to take high value Indian rupee currency notes nor to be stupid enough to "buy" the Indian currency abroad. These are more likely to be fake than anything else. In any case, beyond the authorised limit, no one should take in or take out the currency in the first place!

Any assurance from the Reserve Bank Governor in this matter would be welcomed by the concerned public, as fake currencies may play a role in the ensuing elections.

Earlier articles on fake currency racket:

Read an earlier story about counterfeit notes over here

Falling rupee and its counterfeit cousin!

When China sends fake rupee notes to a Delhi restaurant

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also 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.)