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Intelligence agencies advise government to replace Rs 500 notes

Josy Joseph in New Delhi

Security agencies have advised the government to withdraw all the existing currency notes of Rs 500 denomination and replace them with a more secure series of the same denomination to control the menace of counterfeit currency being pumped in by Pakistan.

The Reserve Bank of India's response to this proposal is not known, but it has officially stated that the counterfeit menace is not of an alarming scale.

According to sources, the agencies made the recommendation on the basis of intelligence inputs from both within India and outside. The intelligence agencies are of the opinion that the only way to curb the menace of fake currency is to withdraw the existing 500-rupee notes and replace them with more secure notes.

The agencies have suggested that all banks be advised to hold back the circulation of Rs 500 notes, thus effecting a complete withdrawal in the shortest possible time. Thereafter, the new series could be released.

But the RBI is the final authority on all matters relating to currency. And the central bank has publicly said that the menace is not alarming yet. RBI Governor Bimal Jalan also told reporters recently that the bank is issuing a new series of Rs 500 and Rs 1,000 denomination notes.

Home ministry sources indicated that once the new series hits the market, the old ones could be withdrawn in a phased manner. A sudden announcement to withdraw the notes could set off panic in the market, "which is unwarranted", they pointed out.

According to intelligence inputs, the fake currency is being smuggled into India through a variety of channels, most famous of them, apart from the terrorists, being the hapless passengers travelling from Pakistan to India on the Samjhauta Express.

Islamic terrorists who undergo training at various camps in Pakistan and Afghanistan are given PRs 5000 at the end of their course. They are then advised to approach Baad Agency in Lahore, where they are given a whopping Rs 1 lakh in fake Indian currency. Baad Agency is a government-controlled organisation.

Hundreds of these terrorists who sneak into India every year are believed to carry such consignments for use in India as well as Bangladesh and Nepal, their two alternate routes of infiltration.

The intelligence agencies believe that most of the fake notes are printed at two presses in Pakistan, one in Peshwar and the other in Quetta. These printing presses have superior quality machinery that is as good as any available in India.

Pakistan's Inter-Services Intelligence, the usual suspect, has reportedly been pumping in the fake currency also through Nepal and Bangladesh, where they have strong missions. In Nepal, for Rs 50,000 in genuine Indian currency, the going rate is Rs 200,000 in fake currency. The counterfeit notes are also reportedly smuggled in through the Pakistani embassy in Dhaka, Bangladesh.

But the most important and safe couriers are the ordinary folk travelling between India and Pakistan. Hundreds of Indians and Pakistanis, most of them from the lower middle classes, travel by the Samjhauta Express and the Delhi-Lahore bus service every week. Outside railway stations in Pakistan, moneychangers are a major source of fake currency. Interrogation of passengers arrested with fake currency has revealed that most of them were innocent people who had no idea what they were carrying.

The interrogations have also revealed that most of the Indians arrested got the fake currency in Karachi or Lahore, from where they begin their return journey. Most go to Pakistan to meet relatives or on a pilgrimage.

The government has already banned the circulation of 500-rupee notes in seven districts of Bihar. The recent ban in the border districts was ordered after confirmed reports spoke of attempts to smuggle in large quantities of 500-rupee notes into these areas from Nepal.

In Nepal, the police uncovered a massive fake Indian currency racket run by lower-rung staff of the Pakistani embassy in the first week of January. Asam Saboor, an upper division clerk in the embassy, was expelled from Nepal for openly selling fake Indian currency of Rs 500 denomination in Kathmandu.

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