India reports more fake banknotes as new law hits home

The prevalence of counterfeit banknotes in India increased last year as rigorous detection laws took effect.

A more than 50 per cent rise in the proportion of forged Rs1000 ($18) banknotes underpinned the growing detection of counterfeit money in India. The Indian government claims the shift is the consequence of improved practices, as opposed to a sharp uptick in forgeries.

“[Reserve Bank of India]...has instructed all scheduled banks that banknotes in denominations of Rs100 and above should be re-issued by banks...only if these banknotes are duly checked for authenticity and fitness by machines,” the Indian Ministry of Finance told parliament.

Since March 2011 all bank branches with average daily cash receipts of $90,000 and upwards must have the machines. As such, fiscal 2011 was the first full year of the new law and this is the reported reason for the rise.

The explanation fits with where the uptick in detection has occured. RBI actually reported lower prevalence of counterfeit banknotes last year but at branches, where the new law takes effect, the proportion of forgeries increased.