The “funny money” problem in India is no longer a minor bump; it is severe, it is suspected to be much more than the readiness to blame ISI of Pakistan, and requires a total overhaul of the laws pertaining to counterfeit currency

I usually pay for fuel by card at my regular filling station, but needing some at an unfamiliar pump at a remote location outside Delhi a few days ago, chose to pay by cash. What came out of the wallet first was a brand new thousand rupee note, which I handed over to the attendant. He looked at my unkempt hair, dirty clothes and the dented and highway dust-encrusted car, and then I saw some hesitation in his eyes, he then looked at the mint condition of the thousand rupee note again, and asked me if I didn’t have a used note, or hundred rupee notes, or would I not want to use my card instead?
 
Has something like this happened to other people, too?
 
The seizure by the Indian authorities in Delhi of Rs6 crore worth (or much more, according to another source) of counterfeit Indian currency, apparently in mint condition and reportedly brilliantly perfect in all respects when compared to the real currency, finally proves what the grapevine has known and whispered about all the time. That the “funny money” problem in India is no longer a minor bump; it is severe, it is suspected to be much more than the readiness to blame ISI of Pakistan, and requires a total overhaul of the laws pertaining to counterfeit currency, amongst other things.
 
As background, being seafarers, we were always aware of as well as taking precautions on getting saddled with fake currency notes globally. Junk value East German marks being passed off as hard currency West German marks was something all of us had been warned about, but it still did not prevent traders trying to palm them off on us, in all parts of the world. Shipping Corporation of India owned and operated a passenger ship named ‘CHIDAMBARAM’ of all things, which was well known for being used by fake currency smugglers from the Far East into ports along our East Coast.
 
Oh yes, we developed a nose for this stuff early on in life, when most people our age were still surviving on pocket money from their Mummy-ji and Papa-ji. We got stuck with bad money, we had no mummy-papa; we were in trouble—simple as that.
 
In addition, the Goa-Karnataka-Maharashtra triangle, roughly bordered by Kolhapur on one side and Hubli-Dharwad on the other, was made famous by Telgi of Khanapur fame—the business here of fake currency notes being a legacy of the colonial ex-rulers of Goa and the politics therein. Likewise, the opening up of land borders in Rajasthan, the rapid growth of private ports in Gujarat, the shift in opium trade patterns and most of all, the rampant growth of this ‘business’ in the border districts of Uttar Pradesh adds to the ‘traditional’ suspect routes from the Persian Gulf and Far East countries. Add the hill tracts and delta of the Padma to this, and you suddenly have a situation where the attack from all sides is now really serious and terrible for the nation.
 
So far, however, it was in the realm of people in the cash business, the black economy.
 
But now, it appears to be reaching the corporate world too—DeLorean was one example of a top-end business-person who got mixed up in the narcotics and counterfeit currency business to try and rescue his business. Closer home, the activities of Ponzi schemes of the SpeakAsia sort as well as assorted ‘savings schemes’ offering high rates of return barely hide the role of counterfeit money being used for pay-outs, what better way of spreading this currency wider?
 
And then, with the ongoing slowdown impacting droves of first generation business-people nationwide, the lure as well as squeeze of using funny money to get out of sticky situations is reaching epidemic proportions. One ‘system’ doing the rounds apparently works like this, if you are a businessman who is in debt, and wants to bail out, then the loan sharks you owe money to approach you, put the squeeze on you, and you:-
 
1) Provide some sort of collateral, say Rs5 crore worth of property, gold, or anything tangible. Use that to get liquidity of genuine money, white or black. This amount is used for a supposedly genuine purpose and sent out of the country.
2) The genuine funds now sent out are ‘invested’ in funny money with a “face value” to the tune of about two-and-half to three times this amount.
3) After 45-60 days, once the ‘shipment’ is received, the original collateral is returned, along with an equal amount which is adjusted against the debt.
4) The rest of the profits are also kept by the people running this racket.
5) All this is in counterfeit money.
 
Obviously, such things are not cast in stone, but this is broadly how it works. The risk with the genuine collateral, of course, is if things go wrong. The counterfeit currency gets out into circulation by one means or the other—and here too—the role of a variety of private agencies in the business of stuffing of ATMs as well as currency chests in some parts of the country are not above suspicion.
 
The bigger issue here is that the law as it stands today makes a criminal out of the person who is the last in the chain, usually the innocent citizen saddled with a dud currency note, even if he took it out of an ATM a few minutes ago. That is the major change needed, if we really want to fix the issue, especially as the nation heads towards elections. Things are so bad that some young people who got in touch with this correspondent to develop their own counterfeit detecting machine were simply unable to do so, because the risk of running trials on real fake money were too high for them.
 
We have to change the laws, those who find counterfeit money ought to have the legal protection if and when they approach the authorities, instead of being prosecuted, as things stand with the current dispensation. Or we shall see even bigger seizures taking place.
 
 (Veeresh Malik started and sold a couple of companies, is now back to his first love—writing. He is also involved actively in helping small and midsize family-run businesses re-invent themselves. Mr Malik had a career in the Merchant Navy which he left in 1983, qualifications in ship-broking and chartering, a love for travel, and an active participation in print and electronic media as an alternate core competency, all these and more.)

Previous articles on the subject, at Moneylife:
 
http://www.moneylife.in/article/8/590.html
 
http://www.moneylife.in/article/78/7202.html
 
http://www.moneylife.in/article/78/7245.html
 
http://www.moneylife.in/article/78/7308.html
 
http://www.moneylife.in/article/78/8523.html