Counterfeiting, the illegal generation, and the circulation of fake currency have become a continuous trend not only in our country but all around the globe. This illicit activity not only affects the economy but also hampers the credibility of the financial sector, promotes criminal activities, and hinders the progress of a nation. India, as one of the largest economies in the world, has been grappling with the menace of counterfeit currency for years. In India, counterfeit currency is generally classified as “Fake Indian Currency Notes” (FICN). Also, it is important to highlight that the offence of counterfeiting has been criminalized in many countries around the world, including India. The following blog will look into the issue of counterfeiting of currencies, including how widespread it is in India, its effects, and the steps that can be taken to counteract this grave threat to our economy.
EXTENT OF COUNTERFEITING IN OUR COUNTRY
The following are reports from two different types of institutions trying to establish the amount of fake currency in our country: The annual report of the RBI for the fiscal year of 2021-2022 establishes that the number of counterfeited notes detected in the year stood at 2,30,971 notes, out of which the greatest number of notes were in the denomination of 100 rupees, i.e., 92,237 notes, followed by that of 500 rupees, i.e., 79,669 notes.
Furthermore, the 2021 Crime in India report (Volume-I) of the NCRB revealed the exact amount of counterfeit money (FICN) seized in the year 2021. The report states that a total of 3,10,080 fake Indian currencies worth 20,39,29,260 rupees were seized in 2021. It is important to highlight that while the above-stated figures only represent the counterfeit notes that were detected and reported, a lot of counterfeit currencies continue to exist and haunt our country’s economy, and the actual number in circulation may be higher.
IMPACT OF COUNTERFEITING ON OUR ECONOMY AND SOCIETY
The prevalence of fake currencies in a country has far-reaching consequences for its economy and society. People have a great deal of faith and trust in their country’s currency notes, but what if that same currency is widely used but is not real or backed by the central bank? The citizens of such a nation risk losing their faith in not only the currency notes but also the entire economy. Additionally, if a large amount of fake currency is circulating in the market and has also been detected by the people, the long-term consequence of the same could be social instability in the form of protests, public dissatisfaction, and unrest in the country. We all know that inflation in an economy stems from the sustained presence of currency notes in the market. When the central banks of different countries are persistently on the road to taming inflation by reducing the amount of money in the market, continued induction of new and fake currency in the market could result in an unmitigated swelling of inflation. Further, More often than not, counterfeit currency finds its way into different types of non-legal purposes like drug trafficking, human trafficking, terrorism, money laundering, etc. and If a counterfeit currency is used in cross-border transactions, the consequences can be adverse. The use of fake money can damage the reputation of a country’s currency, leading to decreased confidence in conducting trade with that nation and resulting in reduced foreign investments and decreased export competitiveness.
RULES AND REGULATIONS IN OUR COUNTRY
Section 489A and other sections of the Indian Penal Code: This section of the IPC criminalizes “counterfeiting currency-notes or bank-notes” and punishes the offender with an “imprisonment of life or imprisonment up to ten years” and “a fine.” The important aspect here is to highlight that not only the one who counterfeits but also the one who takes part in the process (though knowingly) in any way can also be penalized under this section. It is not only this section of the IPC that penalises counterfeit currency but also other sections, i.e., Sections 489B, 489C, 489D, and 489E, which are of the same nature. There might be a possible conundrum regarding the reach of Section 489A Does it include foreign currency under its purview or is it limited to the currency of our nation? The Supreme Court of India, while analysing this section in the case of “State Of Kerala vs Mathal Verghese & Ors (1986)”, found the word “any” written under it, only to conclude that be it a foreign currency or Indian currency, this section would include both of them under its purview. Sections 22 and 26 of the Reserve Bank of India Act, 1934 are pertinent to our subject. Section 22 of the act gives the Reserve Bank of India the sole right to issue banknotes in our country. It naturally follows that any other person or institution trying to do the same shall be penalised and dealt with appropriately. Section 26 of the act establishes that every bank note issued by the RBI shall be legal tender at any place in India. We can infer from this section that the counterfeit notes (not issued by the central bank) are not legal tender in the eyes of the RBI.
Prevention of Money Laundering Act, 2002 defines and criminalises money laundering under section 3 and section 4, respectively. Money laundering concerns itself with “proceeds of crime,” and as per the schedule of this act, the word “crime” includes Section 489A and 489B of the IPC.
The National Crime Records Bureau (NCRB) has developed this national-level database to record and report FICN seizures made by State/UT police, investigative agencies, intelligence agencies, CAPF (Central Armed Police Forces), and detections made by banks (including RBI).
STEPS TO REDUCE COUNTERFEITING: ACTIONS TOWARD ROOTING OUT THE MENACE
Counterfeiting presents a grave challenge to our country’s economy, and the efforts to reduce it are a comprehensive and ongoing process. Some of the steps that can be fruitful have been elaborated on below:
Advanced Security Features: The RBI has been continuously working to improve the security features of the currency notes, which makes copying a bank note more difficult. The efforts range from using security threads and micro printing to unique serial numbers and intaglio printing on the bank notes.
Demonetisation of 2016: The central government’s move to demonetise 500 and 1000-rupee notes in 2016 was a step in the right direction to curb the menace of black money and fake notes by reducing the amount of cash available in the system. More such steps can be put to work to ensure that fake notes, if not eliminated, can be reduced to a large extent.
Virtual Money Transactions: The RBI should promote digital or cashless transactions (like mobile wallets and UPI) as opposed to the use of currency notes for payments to help reduce the circulation of counterfeit currency. The proliferation of Central Bank Digital Currency (CBDC) can also act as a blessing for the effort in this direction.
Public Awareness Campaigns: The RBI, along with other financial institutions, should regularly conduct awareness campaigns to make sure that people have an understanding of the security features of genuine currency notes. This would make sure that people in our country can differentiate between a genuine currency note and a fake one.
Counterfeiting remains a significant global concern with far-reaching implications. Counterfeiters employ sophisticated techniques and technologies to replicate banknotes, making it increasingly challenging for authorities to detect and prevent counterfeiting. For the sake of the immense faith that people invest in their currency, it is important to root out this threat from our society by taking a collaborative and multi-pronged approach. By considering the societal and economic implications of counterfeiting and taking note of the above-stated steps, we can work towards creating an economy that bears only genuine currency notes.
Author(s) Name: Akshat Sharma (Gujarat National Law University, Gandhinagar)