By Dr. Gyan Pathak
The NIA investigation into the recovery of counterfeit currency worth ₹17.29 crore from a Punjab National Bank currency chest in Saharanpur has brought the unfinished counterfeit-currency question back into focus. The significance of the case lies not merely in the value of the suspected fake currency, but in its alleged location within the formal banking cash-management system.
Almost a decade after demonetisation was justified partly as a weapon against fake currency, the counterfeit problem has not disappeared: it has migrated to the new currency architecture, with the ₹500 note emerging as the principal counterfeit target. The Saharanpur investigation therefore raises a more fundamental question than whether the 2016 counterfeit stock was extinguished—whether the institutional and technological ecosystem capable of producing, moving and potentially infiltrating counterfeit currency was ever dismantled.
The NIA investigation is still ongoing and cannot by itself establish systemic failure, but it is a significant reminder that demonetisation disrupted a counterfeit stock, rather than necessarily eliminating the counterfeit economy.
On 7 September 2026, the NIA arrested Amit Kumar, a former/serving PNB currency-chest manager, in connection with the recovery of counterfeit currency with a face value of about ₹17.29 crore from a PNB currency chest in Saharanpur. The NIA had taken over the case on 3 September.
Reports say that ₹111 crore in cash had earlier on July 6 been sent from Saharanpur through the currency-handling network to the RBI’s Jaipur office. The consignment reportedly comprised 1,900 bundles of ₹500 notes and 800 bundles of ₹200 notes. NIA is now examining whether some counterfeit notes may have reached branches or ATMs before detection.
The fake currency found in the bank’s currency chest is significant, and can’t be treated as if it was found with any street level courier or at a border, or elsewhere with individual.
It is worth recalling that on 8 November 2016, the government withdrew the legal-tender status of the old ₹500 and ₹1,000 notes, partly with the objective of curbing Fake Indian Currency Notes (FICN).
However, the RBI data shows that the counterfeit notes detected in the banking system in rose by 20.4 per cent in 1016-17 in the year of demonetization compared to 2015-16. A total of 632,926 counterfeit notes were detected in 2015-16 but it rose to 762,072 in 2016-17. The RBI attributed the unusually high detection partly to the massive processing and verification of the withdrawn ₹500 and ₹1,000 notes.
In 2016-17 banks detected 317,567 notes of ₹500 old-series counterfeit and 256,324 notes of ₹1,000 counterfeit. Together, that was 573,891 counterfeit notes, with a face value of about ₹41.5 crore.
A particularly important development was the emergence of counterfeit versions of the new ₹500 and ₹2,000 notes introduced after demonetisation. In 2017–18, RBI detected 9,892 fake new ₹500 notes and 17,929 fake ₹2,000 notes compared to only 199 fake new ₹500 notes and 638 fake ₹2,000 notes in 2016–17, when the new notes had only recently entered circulation.
By 2018–19, counterfeit detection fell further to 317,384 notes, although counterfeits of the new ₹500 increased by 121% and those of ₹2,000 by 21.9% compared with the previous year. In 2019-20 total number of detected counterfeit notes were 296,695 out of which new New ₹500 wer 30,054 and ₹2,000 were 17,020. In 2020-21 a total of 208,625 counterfeit notes were detected out of which New ₹500 were 39,453 and ₹2,000 were 8,798.
There was a sharp increase in counterfeit notes in 2021-22. Counterfeits of new ₹500 increased to 79,669 (+101.9%) and ₹2,000 to 13,604 (+54.6%). The total number of counterfeit notes increased to 230,971 (+10.7 per cent).
However, in three subsequent years 2022-23, 2023-24, and 2024-25 the number of counterfeit notes decreased from 225,769 to 222,639, and 217,000 respectively. However, there was a sharp increase in counterfeit ₹500 notes which rose to 118,000 in 2024-25 which was 37.3 per cent increase. By that time ₹2,000 notes were out of circulation, but 3,508 counterfeits were detected which was 86.5 per cent lower than the previous year.
Last year in 2025-26 a total of 229,746 counterfeit notes were detected out of which ₹500 notes were 141,907 and ₹2000 fake notes were 824. The total increase in fake notes was 5.7%. The striking feature was the ₹500 denomination fake notes rose 20.5%, from 117,722 to 141,907. The data for 2026-27 is not yet available.
The data shows that eight years after demonetisation, counterfeit currency has not disappeared. Instead, the counterfeit problem has increasingly shifted towards the new ₹500 note—the denomination that became the principal high-value note after the withdrawal of the old ₹500 and ₹1,000 notes.
On 1 April 2026, the RBI issued a new Master Direction on Counterfeit Notes—Detection, Reporting and Monitoring, consolidating its instructions to banks. On 31 July 2026, RBI specifically directed banks to strengthen counterfeit-note detection, including training cash-handling staff; installing note-authentication/sorting machines in branches in districts with international borders; analysing counterfeit-note data to identify hotspots and trends; and strengthening internal monitoring.
It shows that the RBI is still treating counterfeit currency as an active policy problem in 2026, rather than a problem that was permanently solved by demonetisation. The current NIA arrests is the proof that the problem of counterfeit notes in the banking system has a bigger dimension with their entering the currency chests of the banks. (IPA Service)
