The annual report of RBI stated that compared to the last year RBI discovered 101% of more fake notes of Rs. 500 and 54.6 % of more fake notes of Rs. 2000.
The report also mentions that during 2021-22, out of the total Fake Indian Currency Notes (FICNs) detected in the banking sector, 6.9 percent were detected at the Reserve Bank and 93.1 percent at other banks.
As per the RBI report, there are 79,669 pieces of fake Rs 500 notes detected in FY-22.
In Nov 2016, Government announced the demonetization of Rs 500 and Rs 1,000 banknotes. The purpose was to eliminate the use of counterfeit or fake notes, stop corruption, and give a boost to digital transactions.
But the recent RBI report on the spike of fake notes certainly claims the opposite. No matter how many policies have been introduced; these illicit activities could always find a way to make it work.
This report of RBI on counterfeit currency is giving us one more reason to adopt central bank digital currency.
Will CBDC reduce Fake Note circulation?
Experts say CBDC could be a way for India to eliminate the widespread circulation of counterfeit currency.
CBDC built on blockchain technology is tamperproof. Each unit of CBDC is traceable and that’s why it’s impossible to create its replica.
All the transactions get recorded on a secure ledger managed by the central bank.
What is Central Bank Digital Currency (CBDC)?
CBDC is the digital or virtual form of a country’s fiat currency (India’s fiat currency is Cash) regulated by central banks. This currency holds a legal tender status and carries equal value as printed money or coins.
The Indian government had announced India’s central bank digital currency Digital Rupee in Union Budget 2022. Finance Minister Nirmala Sitharaman mentioned that this regulated CBDC will strengthen India’s economy, increase efficiency and lower the expenses of the country’s currency management system.
Many countries are now exploring the option of CBDC as it offers multiple benefits. Countries like The Bahamas & Nigeria have already launched their own Central Bank Digital Currency.
China could be the next in the row to announce the launch of its CBDC Digital Yuan as it has widely started the trial phase throughout the country. Recently Chinese media stated that the government has rolled out the e-CNY enabled smart student ID cards at Hainan Lu Xun Middle School.
Latest Update on India CBDC: RBI proposed a “Graded approach” on CBDC
RBI mentioned in the annual report that,
“The Reserve Bank proposes to adopt a graded approach to the introduction of CBDC, going step by step through stages of Proof of Concept 12, pilots and the launch”
Proof of concept is the process of discovering whether the concept can be implemented in reality and will it function the way it should be.
The Indian Government is weighing the pros and cons of the central bank digital currency (CBDC). RBI stated that the design of CBDC needs to be in conformity with the stated objectives of monetary policy, financial stability, and efficient operations of currency and payment systems.
Conclusion
RBI’s report on the spike of fake currency is raising a serious question about the currency management system. Also, it is giving us one more reason to look forward to central bank digital currency.
After the report goes online, many opposition leaders are blaming and mocking the current government and calling a demonetization the biggest failure.
This is the high time government should make some noticeable progress on the development of CBDC and brings out more precautionary measures to break the chain of counterfeit currency circulation.
Read complete RBI annual report 2022.
Tags – Central Bank Digital Currency (CBDC), Digital Currency India