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End of fake notes?
The government’s plan to introduce plastic currency to fight against counterfeit notes and keep a check on money laundering is a step in the right direction
The menace of money laundering and fake currency is growing bigger and can wreak widepread havoc and damage to the nation’s economy and its financial system. As per estimates, India tops the list of countries with almost $1.5 trillion in black money in Swiss banks, followed by Russia at $470 billion, UK at $390 billion, Ukraine with $100 billion and China with $96 billion. Compounding this grave problem is the emergence of the rupee as the counterfeiter’s currency of choice internationally. A recent report compiled by the Financial Intelligence Unit of the Union Finance Ministry estimated a 400% increase over recent years in counterfeit transactions in India’s financial channels. During 2010-11, the agency detected “4,23,539 incidents of Fake Indian Currency Notes with a face value of over Rs.350 million. The 2011-12 figures are higher. Besides, a large proportion of fake currency notes keeps floating without getting detected, which means that the value of counterfeit currency floating in the system is much higher. Currently, the value of the fake currency in the market is estimated to be a staggering Rs.120,000,000,000,000, or Rs.12 trillion.
Over the years several suggestions have been made to check the growth of the fake currency malaise, including the introduction of Radio Frequency Identification tags in high value Indian notes. Now, the Government is seriously considering introduction of plastic currency notes in the country to check the menace of economic terrorism in the form of fake notes and also to improve currency longevity, RBI Governor D. Subbarao has said. Plastic banknotes have a polymer substrate that is hard to reproduce using photocopiers and scanners. A key feature is a clear window, which normally contains an ‘optical variable device’ that splits light into its component colours and is extremely hard to counterfeit. Plastic notes can also contain holograms, which are difficult to replicate. Besides, the government also has an option to add enhanced security measures from time to time due to the expiry dates these notes come with. When notes are printed on plastic or polymer, it becomes easier to recognise a counterfeit. Making a fake note out of this material is not only time consuming, but very costly, which acts as a deterrent to the counterfeiter to make an investment. Investigation of plastic notes has revealed that faking it is easily detectable. The first visible difference is in the thickness of the notes. Secondly, fake plastic notes come with a crude embossing in the clear window. Thirdly, the sound on flicking the fake note has been found to be different, exposing the cheaper polymer substrate used by the counterfeiter.
Will plastic currency be able to fight counterfeit ones? In countries where plastic banknotes have been introduced, the scourge of fake notes has been successfully tamed. It is because plastic notes with their riotous colors, multiple layers, raised letters, hidden text and other tricks have proved to be a tough nut to crack for counterfeiters. In countries like Australia, New Zealand, Fiji, Papua New Guinea, Romania, Bermuda, Brunei and Vietnam where plastic notes have been introduced, the problem of fake currency has virtually disappeared. In Australia, plastic currency was introduced for a four-year period between 1992 and 1996. During this period the Australian government only found 26 fake notes ($20 denominations). Impressed with the success of plastic notes in containing the damage from fake currency, several countries globally have shown their preferences for plastic currency over paper currency. Plastic banknotes are set to be introduced in Britain, replacing the paper money used for more than 300 years. The Bank of England has “put out a £1billion tender from 2015 for the printing of notes.”
In light of the experience from other countries where plastic money is successfully replacing paper currency, the Indian government seems to moving in the right direction. In India, RBI is planning to introduce one billion pieces of Rs 10 notes in polymer or plastic on a trial basis in Kochi, Mysore, Jaipur, Bhubaneswar and Shimla, although a timeline is yet to be decided. If this pilot run is successful, it will be replicated in the entire country. Officials in the Financial Intelligence Unit of the Finance Ministry are hopeful that as in other countries, the successful execution and implentation of plastic currency notes in India will help stamp out the menace of fake currency in another three to five four years.
By:- Amir Hossain
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