Security Scandal: New Rs 500 Note Is Vulnerable to Counterfeiting

Skipping a crucial step in printing the new Rs 500 note may make it easy to counterfeit, reports Chandan Nandy.

5 min read

The cash printing press in Dewas, Madhya Pradesh, has given a go-by to a vital step in the production of the new Rs 500 note, leaving it open to forced errors and counterfeiting. The decision to skip the crucial phase was taken by senior Finance Ministry bureaucrats and conveyed to the management of the corporation running the Dewas Bank Note Press unit.

Also Read: Govt Denies Rs 500 Note Printing Halted Amid Massive Shortfall


‘Colour Examination’ Skipped

Security Printing and Minting Corporation of India Ltd (SPMCIL) sources in Dewas revealed that the “colour examination” step in the five-stage process involving the printing of the new Rs 500 notes has been deliberately skipped because of the tremendous pressure that the printing unit has been faced with since production of the new note began in late October. The Dewas currency note printing unit is operated by SPMCIL, which is under the Finance Ministry.

From a security perspective, skipping this vital process leaves banknotes vulnerable to counterfeiting, easy drainage, bleeding and removal of inks from the banknotes, enabling easier colour-by-colour reproduction and/or over-printing of higher denominations.

More importantly, the colour examination phase helps detect defective notes, which is not being done at the Dewas unit.

Also Read: Rs 500 Note Printing Halted, Operation Will Shift to Mysuru Press

Skipping a crucial step in printing the new Rs 500 note may make it  easy to counterfeit, reports Chandan Nandy.
A woman displays a bouquet of the new Rs 500 currency notes in Dehradun, 29 November 2016. (Photo: PTI)

Defective Notes Winked At

SPMCIL sources said that since the printing of the new Rs 500 notes began, 2-5 percent of defective notes have also been printed but were not segregated from the normal ones. Consequently, they are now among the new notes in circulation.

The Quint reported on 28 November that the extreme shortage of the new Rs 500 notes, printing errors, outdated machinery, and low rate of printing at SPMCIL’s Dewas unit has forced the government to order additional printing of the high-value currency note at the Mysuru press, which is operated by the Bharatiya Reserve Bank Note Mudran Ltd (BRBNML), a wholly-owned subsidiary of the Reserve Bank of India.

When contacted, RBI spokesperson Alpana Killawala said she could not comment as “Dewas comes under the Finance Ministry.” Multiple attempts to contact Dewas SPMCIL General Manager NC Velappa over the phone failed. Commenting on The Quint’s report, Government of India spokesperson, PIB Director General Frank Noronha, said: “It is absolutely incorrect and there is no truth in it.”

Also Read: Currency Ban: Corporate Elites Laughing All the Way to the Bank


Five-Phase Printing Process

The five stages of printing a high-value banknote involves:

a) offset printing in which the basic design of the denomination is laid out and icon are printed half on one side and half on the other, forming a complete image when seen in transmitted light;

b) intaglio, in which RESERVE BANK OF INDIA in English and Hindi is printed; MK Gandhi’s image is embossed; the “I promise to pay the bearer the sum five-hundred rupees” is printed in English and Hindi; the RBI governor’s signature is inlaid and the value of the currency note is printed in 15 vernacular languages;

c) colour examination, in which not only all the high-security colour schemes but also those of the security thread (whose colour changes from green to blue when seen from different angles) are imprinted and checked; numbering, in which the notes are serially numbered; and cutting, which involves accurate cutting of individual notes from large sheets.

Also Read: Demonetisation Math: How Much Cash Was Part of Our Black Economy?

Skipping a crucial step in printing the new Rs 500 note may make it  easy to counterfeit, reports Chandan Nandy.
Representational image of a currency note press. (Photo: Reuters)

Frequent Machine Breakdowns

What has also bedevilled the printing of the new Rs 500 notes at the Dewas Bank Note Press is frequent breakdown of the various imported machines involved in the entire production process. The machine outages, which occur daily on several occasions and in 10-30 minutes’ duration, slows down the continuous task which is being managed by deploying workers in three shifts and is “round-the-clock”.

“Breakdowns are routine and maintenance crews are having a tough time fixing the faults,” LN Maru, a foreman at the Dewas Bank Note Press told The Quint over the phone.

Maru said that 1,300 employees, including officers, are engaged “only in the printing of the new Rs 500 notes while the printing of the Rs 100, Rs 50 and Rs 20 notes has been stopped at Dewas since October end” when the new high-value went in for production.

The usual cause of the breakdowns is attributed to jamming of the currency paper and overflow of inks at the time that “plates and blankets” are cleaned. However, some of the errors are human as some “untrained and unskilled” workers, besides some retired employees, have been drafted in the massive exercise.

Also Read: Why Going Cashless Is Going to Be Tough in India


Meeting Target Hit

Anil Sathe, a senior checker at the Dewas unit, said that “there are times when 25-30 percent of production (the target has been set for 12 million Rs 500 note pieces daily) is hit by the breakdowns.” Both Sathe and Maru claimed that the printing of the new Rs 500 notes “began at least a month after the new Rs 2,000 notes went in for production at BRBNML’s Salboni (West Midnapore) and Mysuru presses.”

Speaking on condition of anonymity, a senior offset machine operator at the Dewas press said that “since the machines (imported from various countries but primarily from Germany and the UK) are running 24 hours, non-stop, breakdowns are natural and does slow down progress towards meeting the huge demand.” Records are maintained only of major breakdowns. About three months ago, SPMCIL’s Dewas unit encountered a major breakdown involving malfunctioning of the security thread in the Rs 100 notes, seriously affecting production.

SPMCIL sources agreed that the rate of production of Rs 500 notes was low and three presses (in Nashik, Dewas and now Mysuru) would need to print 32 million pieces of the note – four times that of the Rs 2,000 note – to balance the huge shortfall and the consequent unmet demand in the economy. Only about 300 million pieces of the Rs 500 notes have been printed since October end, even though the RBI’s indent is huge.


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