By Nantoo Banerjee
The rise of counterfeit Rs 500 notes from the Mahatma Gandhi (new) series is alarming, with instances nearly quadrupling from 2018-19 to 2023-24. Meanwhile, the detection of counterfeit Rs 2,000 notes has tripled since 2020-21, despite their continued acceptance as legal tender, with the Reserve Bank of India (RBI) reporting that 98 percent of these notes have been returned since the withdrawal announcement in May 2023.
The burgeoning circulation of fake Rs 500 and Rs 200 notes is particularly troubling. As the Rs 500 note has become essential for daily transactions, both the government and RBI are on high alert. Last week, Union Minister for Finance Pankaj Chaudhary voiced concerns in the Lok Sabha about the escalating issue of counterfeit currency.
Based on official statistics, the number of detected counterfeit notes soared from 21,865 million pieces in 2018-19 to a peak of 91,110 million pieces in 2022-23, before slightly decreasing to 85,711 million pieces in 2023-24. This marks a considerable rise, though the actual number of undetected counterfeit notes remains unknown, particularly in rural and semi-urban areas where operators and customers evade bank scrutiny. These fake notes are often linked to terrorism and are utilized to undermine the country’s economy.
West Bengal and Assam serve as significant entry points for counterfeit Indian currency from Bangladesh, Pakistan, and Nepal. Reports indicate that both Bangladesh and Pakistan utilize Nepal to smuggle counterfeit notes into eastern India. Recently, law enforcement in Golaghat, Assam, arrested four individuals and seized advanced printing equipment and various denominations of fake currency. Yet, the main orchestrators continue to evade capture.
The RBI estimates that around 80 percent of counterfeit notes seized in the country originate from three districts along the Indo-Bangladesh border: Malda, Murshidabad, and Nadia, with Malda having the highest share. Many young residents from these districts work in other Indian states and are reportedly used as couriers for smuggling counterfeit currency from Bangladesh. This smuggling network has expanded, with recent police operations in Dhaka uncovering sizable caches of counterfeit notes, allegedly printed by a Lahore-based syndicate in Pakistan and transported via complex routes.
Notably, the Bangladesh police stated that these counterfeit notes are often concealed within shipments of marble stones, hidden in specially constructed compartments before being smuggled into India. Investigations have shown that fake currency may also enter India through various international routes, including direct crossings from Nepal and Bangladesh or indirect paths involving Dubai and other locations. Pakistan and Bangladesh have emerged as key players in the production and distribution of fake Indian currency, aiming to fund terrorism, inflate prices in India, and erode trust in the currency. INTERPOL has noted that counterfeiting financial instruments supports the underground economy and criminal organizations.
Counterfeiting is a global issue, with the US Dollar often cited as the most counterfeited currency worldwide. Reports indicate that some advanced counterfeit US bills are circulated as legitimate currency or used to secure loans. The Euro, launched in 2002, is the second most counterfeited note. In response, central banks worldwide are working to develop counterfeit-resistant currencies featuring complex security measures to make counterfeiting more difficult.
These measures include raised intaglio printing, serial numbers, watermarks, security threads, and specialized features on coins. For trained individuals, identifying fake Indian currency notes isn’t overly complicated—genuine notes have an embedded security thread, which can be checked by tilting the note against light. However, sophisticated counterfeiting technology poses significant challenges for central banking authorities, as criminal organizations increasingly employ advanced techniques.
Commonly counterfeited currencies include the US Dollar, British Pound, Euro, Australian Dollar, Philippine Peso, Canadian Dollar, South African Rand, New Zealand Dollar, and Malaysian Ringgit—all of which are convertible currencies. In contrast, the Indian Rupee (INR) is only partially convertible, fully exchangeable for trade-related transactions but limited in other financial contexts. This makes counterfeiting Indian currency a prevalent concern.
