Fake Indian Currency Notes (FICN)

AUG 18

Mains   > Security   >   Money laundering   >   Black money


  • The value of the counterfeit currency in the banking system recorded a sharp decline of more than 80% between 2016-17 and 2021-22, according to a Finance Ministry reply in the Lok Sabha.
  • However, as per the National Crime Records Bureau (NCRB) data, the value of fake currency seized by various enforcement agencies has shot up from Rs 28 crore in 2017 to Rs. 92.18 crore in 2020.


  • According to RBI, among all notes that saw an increase of fake notes, Rs 500 was the worst hit. As compared to last year, RBI detected 101.9% more fake notes of Rs 500 denomination and a 54.16% increase in fake notes of Rs 2,000 tender.


  • Pumped by external state actors:
    • External state actors like Pakistan’s ISI have been instrumental in creating FICN and smuggled it into India through multiple international routes.
    • Eg: Indian investigators believes that FICN is printed at Pakistani Security Presses at Karachi.
  • Lack of awareness among public:
    • The general public is largely unaware of the 'safety features' in genuine notes, especially the Rs. 500 and Rs. 2000 notes released after the 2016 demonetisation. This makes detection of fake notes difficult.  
  • Continuing cash transactions:
    • Even though the pandemic has accelerated the adoption of digital payments multi-fold in the last two years, cash is still king in India.
    • Eg: currency under circulation touching an all-time high of Rs 3,09,827 crore on March 4, 2022.
  • Technological advancements:
    • Advances in printing, specialized paper, inks and other materials have made it possible to create counterfeits that are difficult to detect.


  • Economic terrorism:
    • Pumping FICN to destabilize the Indian economy by external sources is an act of economic terrorism.
  • Funds illicit activities like terrorism:
    • Counterfeit currency has long been recognized as a source of funding for terrorism in India.
  • Undermines public confidence:
    • Glut of FICN in the economy creates doubts in the mind of common man and results in loss of public confidence over national currency.
  • Aggravates inflation:
    • Circulation of a large amount of FICN increases the volume of money in circulation, which may lead to high demand for goods and commodities. This aggravates inflation and lead to currency devaluation.
  • Renders monetary policy ineffective:
    • Presence of large FICN will affect the RBI measures in controlling the volume of money in circulation through measures like bank rates and liquidity adjustment facility.
  • Loss for firms:
    • Banks reject the fake notes and do not reimburse the losses. Firms which are involved in daily cash transactions face heavy losses in the long run 


  • Demonetisation:
    • One of the intended objective of the 2016 demonetisation was the eradication of FICN from the economy.
  • Legislative measures:
    • Section 489A of IPC: Provides for life imprisonment and fines for counterfeiting currency-note.
    • Strengthening the provisions in the Unlawful Activities (Prevention) Act, 1967 to combat terror financing.
  • Institutional measures:
    • Terror Funding and Fake Currency Cell in the National Investigation Agency (NIA) has been constituted to conduct a focused investigation of terror funding and fake currency cases.
    • FICN Coordination Group to share intelligence and information with the security agencies in the States and the Centre.
  • Capacity building:
    • RBI has, in the recent past, introduced several new security features to prevent counterfeiting of notes. The RBI has also issued a master circular on the detection and reporting of fake currency.
    • Fake Indian Currency Notes Information System: NCRB has created a national level database and deployed Web-enabled software for online recording and reporting of FICN seizures made by security agencies and Detections made by Banks.
  • Border management:
    • Through various efforts, the armed forces and paramilitary are strengthened to effectively monitor and prevent cross border smuggling.
    • Eg: Border Infrastructure and Management scheme, Comprehensive Integrated Border Management System and smart fencing.
  • Cooperation with neighbours:
    • A Memorandum of Understanding (MoU) has been signed between India and Bangladesh to prevent and counter smuggling and circulation of fake currency notes.
    • Training programmes are held for the police officers of Nepal and Bangladesh to sensitise them.
    • Joint Task Force is functioning between India and Bangladesh for building trust and cooperation for exchange of information and analysis of smugglers of FICN.


  • More digitisation of currency transactions: Through efforts like the adoption of central bank digital currency by the RBI
  • Improve awareness through mass media and campaigns
  • Use of technology: Eg: AI for detecting trends in fake notes, so that hotspots can be identified
  • Adoption of new safety measures in notes, such as using the advanced security ink developed by CSIR-National Physical Laboratory (NPL) in 2019.
  • International collaborations to counter Pakistan, through institutions like the Financial Action Task Force.  


Q. Analyse the threat posed by Fake Indian Currency Notes and suggest measures to eradicate the menace?