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India Fails to Curb Use of Fake Currency After Four and a Half Year Note Ban

CC0 / / Rupee
Rupee - Sputnik International, 1920, 31.05.2021
Fake currency has always been a menace to the Indian economy. Indian Prime Minister Narendra Modi’s demonetization exercise in 2016 was intended towards reducing the circulation of fake notes in the economy, but the recently released annual report of India’s Central Bank reveals that the problem still prevails.

The annual report of the Indian Central Bank, released on 27 May 2021, reveals that the number of fake ₹500 notes in circulation has increased in India by 31 percent over the last year.

In an overnight decision in November 2016, Prime Minister Modi canceled the ₹500 and ₹1000 tenders (the highest denominations at the time), thus wiping 86 percent of the money in circulation.

However, the report also said that overall there has been a 29.7 percent decrease in the circulation of fake currency in the corresponding time.

According to the report, the number of fake ₹500 currency notes was reported to be 21,865, while in 2019-20 it went up to 30,054 and in 2020-21 it went up to 39,453.

"As far as fake currency is concerned, it has increased because there is a lack of proper monitoring. In order to curb the fake currency, the Reserve Bank of India (RBI) should constitute a task force comprising members from RBI, representatives from commercial bank branches, and local police," Akash Jindal, an economic analyst, told Sputnik.

The number of other fake currencies in circulation has also come down. The number of ₹2000 notes from 2018-19 to 2020-21 has come down to 8,798 from 21,847, while the number of ₹200 notes increased in 2019-20 but has come down in 2020-21.

“The data given by the RBI in its annual report is a very tiny percentage of the total fake currency circulating in the economy. Now, the total currency in circulation is far more than what it was before demonetization,” Arun Kumar, economist and former professor of Delhi-based Jawaharlal Nehru University, told Sputnik.

“Earlier the currency in circulation was $248 billion while now it is around $399 billion so the RBI has given the percentage which it has captured while a lot of it is still not been captured. So, the RBI has failed to estimate the fake currency in a proper way,” he added.

Out of the total of fake currency notes which were detected in the system, 3.9 percent were captured by India’s Central Bank while the other 96.1 percent were caught by other banks which include private players, public sector entities and cooperatives.

The ₹500 notes are the most widely circulated denomination in India currently and account for one-fourth of the overall volume, as they account for 68.4 percent of overall notes in circulation, while the second most-widely circulated denomination, the ₹2000 notes, corner 85.7 percent.

The data released by India’s Central Bank does not include counterfeit notes seized by police and other law enforcement agencies.

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