RBI Annual Report Shows 102% Spike in Rs500 Fake Currency Notes
Moneylife Digital Team 01 June 2022
According to the just-released Reserve Bank of India's (RBI) annual report, during FY21-22, 79,669 fake notes of Rs500 were detected, which is 101.9% higher in comparison to FY20-21’s figure of 39,453 notes. On the other hand, 13,604 fake notes of Rs2,000 were detected in FY21-22, 54.6% higher than FY20-21’s figure of 8,798 notes. 
 
The number of fake Rs200 notes in FY21-22 was 27,074, which is 11.7% higher than FY20-21’s figure of 24,245.
 
As far as Rs10 notes are concerned, fake notes of 354 were detected in FY21-22 vs 304 of FY20-21. 311 fake notes of Rs 20 were detected in FY21-22 vs 267 in FY20-21, as per the RBI report.
 
In totality, 2,30,971 fake notes were detected in FY21-22, which includes Re1, Rs2, Rs5,  Rs10, Rs20, Rs50, Rs100, Rs200, Rs500, Rs2,000 notes, along with specified bank notes of Rs1,000 and Rs500. The figure in FY20-21 was 2,08,625 notes. If we further look back on FY19-20, the figure of total fake notes detected stood much higher than these, at 296,695.
 
The RBI report also showed that there was an increase of 16.45% and 16.48% in counterfeit notes of Rs10 and Rs20 respectively in FY21-22. Fake Rs200 notes rose 11.7%. Counterfeit notes detected in denominations of Rs50 and Rs100 declined 28.65% and 16.71%, respectively, the report showed.
 
Out of the total fake Indian currency notes detected in the banking sector, 6.9% were detected at RBI and 93.1% at other banks.
 
In November 2016, the government had announced demonetisation of all Rs500 and Rs1,000 bank notes with an aim to curtail black money and decrease the use of counterfeit currency. It had announced the issuance of new Rs500 and Rs2,000 bank notes. The latest annual report has sparked fresh criticism of demonetisation by Opposition parties which have cited RBI data to attack the Union government.
 
If we look back at FY16-17, the year in which demonetisation happened, as many as 762,072 pieces of fake notes were detected in the banking system that year, which was a nearly 20.4% increase over those in the previous year 2015-16, as per RBI data.
 
According to the annual report, Rs2,000 denomination notes that were introduced post demonetisation in 2016 have continued their steady decline in circulation, and now only account for 1.6% of the total currency notes in circulation in the country as on 31 March 2022 in comparism to 2% as on 31 March 2021.
 
The report revealed that 2,140mn (million) Rs2,000 notes are now in circulation as opposed  to 45546.8 million notes of Rs500 at the end of March 2022.
 
In 2020, four years after India’s demonetisation exercise, Rs2,000 denomination notes in circulation stood at 2740 million, accounting for 2.4% of the total number of currency notes in circulation. A year later the figure declined to 2450 million or 2% of the total bank notes in circulation. It has, thus, dropped to its lowest at the end of last fiscal.
 
The high value Rs2,000 note was issued by the RBI in 2016 to quickly remonetise the economy from which overnight Rs1,000 and old Rs500 notes were flushed out. ATMs had to be recalibrated to dispense Rs 2000 notes and quickly the note became ubiquitous.
 
The objective of the demonetisation exercise was to bring defaulters within the purview of the banking system. The government claimed it would net tax evaders and black money hoarders. However, with Rs2,000 notes being churned out to replace the old high value notes, over the years, this note became a hoarder’s favourite currency.
 
Most Preferred and Least Preferred Notes
The report also mentioned findings from RBI’s bank note survey of consumers. The survey findings revealed that Rs100 was the most preferred bank note while Rs2,000 was the least preferred denomination. Among coins, the denomination of Rs5 was the most preferred, whereas Re1 was the least preferred.
 
For this survey, a diverse sample of 11,000 respondents from rural, semi-urban, urban and metropolitan areas, spanning 28 states and three Union Territories (UTs) participated in the survey. The survey also included 351 visually impaired respondents (VIR) and covered respondents from the age of 18 to 79 years with a gender representation of 60:40 for males and females. 
 
The watermark of Mahatma Gandhi’s image followed by the windowed security thread were the most recognised security feature. Around 3% of the respondents were not aware of any bank note security feature. Overall, approximately 7 out of 10 respondents were found to be satisfied with the new series of bank notes. Among the VIR, the majority were found to be aware of the quality of paper and size of the bank notes, as per RBI report.
 
RBI has pitched for structural reforms for sustained economic growth amid rising inflationary pressure and asked banks to remain watchful of possible slippages in restructured loans. 
 
The central bank stressed that the future path of growth would be conditioned by addressing supply-side bottlenecks, calibrating monetary policy to bring down inflation and boosting capital spending. "Undertaking structural reforms to improve India's medium-term growth potential holds the key to secure sustained, balanced and inclusive growth, especially by helping workers adapt to the after-effects of the pandemic by reskilling and enabling them to adopt new technologies for raising productivity," it said in the chapter on 'Assessment and Prospects'.
 
The escalation of geopolitical tensions into war from late-February 2022 has delivered a brutal blow to the world economy, battered as it has been through 2021 by multiple waves of the pandemic, supply chain and logistics disruptions, elevated inflation and bouts of financial market turbulence, triggered by diverging paths of monetary policy normalisation, it added.
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