Currency Counterfeiting In India - What Should Be Done ?

Aug. 22, 2009 - PRLog -- Though the RBI and banks underplay the magnitude of the counterfeit problem in India, the last one year has seen a dramatic increase in seizures of fake currency in every single state-not surprisingly; the Border States witness more of these cases. What seems to be the main cause of concern is the changing pattern of counterfeiting, the global scale of operations and the fact that India has a vast parallel cash economy. Also, increased sophistication of fake currency highlights the fact that security measures employed by RBI need to be up scaled. If India has to combat the crisis, it has to first tackle the area of bank note printing. Considering the nemesis that counterfeiting has on the economy, the governments of various nations have taken a number of steps to combat it.

However, the monetary organizations the world-over, conclude that only continuous design innovation can sustain a low frequency of counterfeit notes in circulation –which holds true also for Indian bank note designers. All banknotes contain security features to deter counterfeiting. Some usual features include paper or polymer substrate and intaglio printing, which assist the public in authenticating notes by touch; and are most often detected by the public and bank tellers because “they don’t feel right.” There has been some talk of Indian moving to polymer notes like Australia. Other note features, include micro printing, magnetic inks, color-varying fluorescent threads, infrared components, and holograms which are valuable authentication across wide range of devices, from handheld devices and ATM machines to high-speed currency sorters, as they appear as black/grey or brown patches on the surface of the counterfeits. Even though RBI uses most of these security features, it further needs to introduce certain advanced, difficult to counterfeit and easily recognizable features such as advanced optical devices like holograms and kinegrams. This is because the public generally does not inspect more than one distinguishing/visible security feature and remembering one single ergonomic verifier in a banknote seems reasonable.

To reduce counterfeits, Indian manufacturers have been consistently trying to convince the government to start using holograms on currency notes, something that currently more than 100 countries are doing. Also, changes in currency design prove to be an important tool to deter counterfeiting. European newspaper articles suggest that counterfeiting rates for the euro are significantly lower than for the individual country bank notes that it replaced. News reports from Canada also illustrate the necessity for updating currency designs. In 2004-05, Bank of Canada introduced new security features like holographic strip, watermark portraits, color shifting threads, a see through number and enhanced fluorescence to upgrade his currency. The new added feature sharply reduced the counterfeiting rate to 2.2 notes from 4.7 per 10,000 during first eight months. Thus, combinations of features that score high on anti-counterfeiting should be incorporated into test banknotes. These could then be subjected to adversarial analysis to determine their deterrent effectiveness and used to gauge public acceptability through mechanisms such as focus groups.

Also we can look at reducing the quantum of currency in circulation by encouraging banking and other transactions through instruments like online payments and use of plastic. Banks further need to adopt sophisticated detection technologies and follow procedure when it comes to reporting fake currency. The Government on its part should encourage fair and fearless reporting of the fake currency.

Otherwise, in the normal course, the person making the report becomes the primary suspect. It also needs to distribute all compromised features of fake notes and make it available to all agencies associated with the investigation. The four main nodal agencies i.e. The CBI, the Directorate of Revenue Intelligence, The Central Economic Intelligence bureau, and the Enforcement Directorate need to look at various aspects of the problem and coordinate on a regular basis. Continuous advances in printing technology needs to take place, which will require banknote designers to work aggressively and keep changing and innovating, to remain ahead of sophisticated counterfeiters.

Conclusion

Currency is widely used in the payment systems of all countries. In each system, there are a large number of participants— households, retail merchants, financial institutions, high-volume currency processors, and the central bank or currency-issuing authority. We may believe that the above means make take India to a country of zero counterfeit currency and accelerate the growth of our economy, however, the way, we in India, can tackle this problem is to exercise vigilance, on the part of every citizen, “If men were angels, no government would be necessary.” This battle against counterfeiting, is not only for the strong alone; but for the vigilant, and the active.

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The Hologram Manufacturers Association of India (HOMAI) is a non-profit organisation established in 1998 to represents and promotes the interest of hologram industry in India as well as to fight against counterfeiting.