India's Fake Notes, A Real Problem Raising Its Ugly Head Again

The numbers make for an interesting story.

The quantum of counterfeit notes detected by banks has been steadily climbing since FY2020-21, rising from around 200,000 pieces to 2,29,746 in FY2025-26, according to Reserve Bank of India (RBI) data. 

According to experts, the actual number of fake notes circulating in the country could be higher than what is captured by the banking channels.

But there is a bigger worry. The ₹500 note, one of the most widely used currency denominations, is increasingly emerging as a favourite among counterfeiters.

Banks detected 85,711 fake ₹500 notes in FY2023-24. A year later, the number shot up to 1,17,722 — an increase of over 37%. The trend continued in 2025-26, when detections climbed another 20% to 1,41,907 pieces.

In other words, fake ₹500 notes are showing up with increasing frequency, raising fresh questions about the circulation of counterfeit currency and the effectiveness of measures put in place to keep it in check.

Not only that, fake currencies were also detected in the case of other denominations like ₹200, ₹100, ₹50, and even ₹10.

Going by the numbers and denomination of notes, the estimate of the actual fake currency in circulation within the country could be anybody’s guess. The number may be much larger as lower denomination notes hardly reach the banks.

Naidu Queers The Pitch

Andhra Pradesh Chief Minister N. Chandrababu Naidu has queered the pitch for a currency policy debate by demanding the scrapping of ₹500 notes altogether.

“I will keep speaking on this. The notes of ₹500 should be scrapped. Only notes of ₹100 and ₹200 should be retained,” Naidu said recently.

His argument is that high-denomination cash fuels corruption, vote-buying and black-money circulation. He wants ₹500 notes withdrawn, leaving only ₹200, ₹100 and the lower denomination notes in circulation.

The Andhra Pradesh Chief Minister also urged Prime Minister Narendra Modi to promote digital currency and digital transactions, saying it would curb corruption, aid wealth creation, and help reduce poverty.

Nadiu's suggestion might also solve the problem of an increasing number of fake currency notes of the face value of ₹500. However, it would be a logistical nightmare for currency printing presses, the Reserve Bank, commercial banks and the public at large to handle the quantity of notes, especially given the falling purchasing power of the domestic currency.

Policy Response To Fake Notes

The problem of fake currency notes has two main dimensions. First, fake notes can erode trust in cash if businesses and citizens fear accepting them. Secondly, proceeds from counterfeiting may support criminal and terrorist activity.

India’s policy response has never been limited to printing more secure notes. It also involves policing, border management, financial intelligence, and international cooperation.

"The measures implemented (to deal with menace of fake notes) include penal provisions under Bharatiya Nyaya Sanhita, 2023 (BNS) & Unlawful Activities (Prevention) Act, 1967 as well as constitution of National Investigation Agency (NIA), FICN Coordination Group (FCORD) and Terror Funding & Fake Currency (TFFC) Cell," Minister of State for Finance Pankaj Chaudhary has said in reply to a Parliament question.

The Centre had issued guidelines for investigation of cases of high-quality counterfeit Indian currency notes. The other initiatives included strengthening security at the international borders, using modern surveillance technology, deploying additional manpower for round-the-clock surveillance, establishing observation posts along the international border, erection of border fencing, and intensive patrolling.

Besides, the government has also signed a Memorandum of Understanding (MoU) with Bangladesh to prevent and counter smuggling and circulation of fake currency notes. It has also conducted training programmes for the police officials of neighbouring Nepal and Bangladesh to sensitise them about smuggling and counterfeiting of Indian currency.

RBI's Role

As regards the Reserve Bank, it is responsible for the design, production, and integrity of banknotes. The RBI has also periodically withdrawn older series and introduced redesigned notes. The new Mahatma Gandhi (New) Series notes include upgraded security features intended to make copying more difficult.

The RBI incurred an expenditure of ₹4,875.2 crore on security printing during 2025-26.

It also launched public awareness campaigns urging citizens to check features such as watermarks, security threads, see-through registers, colour-shifting ink, raised print, and latent images.

What’s Fake, What’s Not

The biggest issue with high-quality fake currency notes is that they are meticulously printed with visible watermarks, and hence it may not be possible for individuals or shopkeepers to detect them with the naked eye. 

Many of them can only be detected by machines or experts.

To facilitate detection of fake notes, Chaudhary said, "All bank branches/identified back offices, and the currency chest branches are equipped with appropriate banknote sorting/verification/ processing/ detection machines."

A fake note can go undetected and remain in circulation till it reaches a bank.

The effective way to deal with the menace of fake currency is to crack the syndicate involved in printing and circulation of counterfeit currency, apprehend the culprits, and ensure exemplary punishment. This can only be done through better intelligence gathering and international cooperation. 

Apprehending a few pieces of fake notes only indicates the existence of a problem and not its extent.