The government has discovered a sophisticated operation by Pakistan's Inter-Services Intelligence (ISI) to counterfeit large numbers of Indian 500-rupee notes and send these into the country. The ISI's objective is to help fund militants from Pakistan operating in India, as well as to create imbalances in India's monetary system.
The counterfeit notes have been smuggled into states like Uttar Pradesh from Nepal and directly into Rajasthan and Punjab from Pakistan, apart from Jammu and Kashmir.
Official sources yesterday told Business Standard that due to the less complex nature of the old series notes, it had been possible for foreign intelligence agencies to counterfeit them. Several fake Rs 500 notes have been detected within the country, but mainly in the northern states like Jammu and Kashmir, Rajasthan and Uttar Pradesh.
More From This Section
Union home ministry sources said intelligence agencies in Pakistan had succeeded in virtually perfecting the block of Rs 500 notes (old series), and had printed them in massive numbers at presses in Quetta and Peshawar. The cash given to militants and sent into Kashmir from Pakistan were from this lot of counterfeit Rs 500 notes, the sources said.
To contain the situation, they said, the Reserve Bank of India had issued a circular to banks not to recirculate Rs 500 notes of the old series, but to send them back to the RBI for destruction. The equivalent value of the returned notes are to be issued from the new series printed at the upgraded press at Nasik.
However, the RBI does not intend to take any more drastic action to deal with the challenge. It has stated unambiguously that there is no intention whatsoever to withdraw 500-rupee notes from circulation.
An official in the banking division of the Union finance ministry confirmed that the RBI had sent the circular to the banks. He also alluded to the dubious antecedents of several Rs 500 notes circulated in Kashmir and other northern areas.
"After the upgradation of the security press at Nasik, counterfeiting Rs 500 notes has become virtually impossible. The difference lies in the water mark, the quality of paper and the changes in Gandhi's portrait besides several small, concealed unknown marks. Once the old notes reach banks, they have been told to screen them, not to recirculate them, and to return them to the RBI", a senior official said.
He, however, clarified that this gradual phase-out of the old series was different from the withdrawal of 1,000-rupee notes several years ago to flush out black money. Holders of old series Rs 500 notes would not be affected in any way, he said and added that after the notes reach banks they would merely not be recirculated, but returned to the nearest RBI branch.
Several wads of counterfeit notes of the currency are reported to have made their way into the country from across the borders from Rajasthan as well as from Nepal through Uttar Pradesh, besides Kashmir. In view of several such reports, there has also been an exchange of communication between the RBI and the Uttar Pradesh director general of police Kanhaiya Lal Gupta.
Recently the Uttar Pradesh police seized several bundles of counterfeit Rs 500 notes on the India-Nepal border in the state. When samples from this lot were shown to RBI officials, they reportedly refused to admit that they were fake due to the near-perfect nature of counterfeiting. Gupta has been asked to probe the matter further.
There are reports that in some places, the "well-faked old series Rs 500 notes" were being sold at a fraction of the face value. For example, six fake Rs 500 notes were reportedly being sold in some Uttar Pradesh towns for around Rs 1000. The reports with official agencies say almost every fake note thus procured had passed off as genuine.