when the first federal coins were issued by the us government in the 1780s, they had the dies cut by an ex - counterfeiter. however, it was the advent of colour copiers and other electronic devices in late twentieth century that made counterfeiting easier. around the world, governments are locked in a fierce race with counterfeiters to keep that one crucial step ahead in terms of technology and security features. governments are also tightening measures to check counterfeiting, apprehend counterfeiters and impose deterrent and harsher punishments. 13. data available in the public domain suggests that the incidence of counterfeiting varies across different countries. while in australia, counterfeit notes detected were around seven pieces per million notes in circulation ( 2008 - 09 ), in canada it was 76 ( 2008 ). in new zealand, the number was a low of 0. 71 counterfeits per million notes in circulation ( 2008 - 09 ), whereas in switzerland it was ten. as for the euro, there was roughly about one counterfeit per 14, 600 bank notes in circulation ( 2008 ). at home here in india, fake notes reported as detected by banks and fake notes found in remittances received by rbi during 2008 - 09 amounted to eight per one million notes in circulation. the data however does not include the counterfeits that are seized by police. the above data shows that, by an international metric, the incidence of counterfeit notes in india is not alarming. nevertheless, counterfeiting per se is a matter of serious concern for the government and the reserve bank. 14. while on the subject of estimate of fake notes, i want to make a clarification. last year, some newspapers had erroneously quoted a figure from the nayak committee report for estimates of forged currency notes in circulation. the nayak committee, which was set up in 1988 to go into the dynamics of currency management, did not make any estimate of fake currency. what it estimated was the projected value of notes in circulation in the year 2000 which has rs. 1, 69, 000 crore. the media incorrectly reported this as the number of fake notes in circulation. 15. the reserve bank ’ s role in addressing the problem of counterfeiting lies in improving the security features of the currency notes, putting in place a system where all fake notes making entry into the banking channel are promptly detected, and raising public awareness levels. for the sake of completeness, let me list the measures

duvvuri subbarao : some issues in currency management remarks by dr duvvuri subbarao, governor of the reserve bank of india, at the foundation stone laying function for the bank note paper mill, at mysore, 22 march 2010. * * * 1. it is my pleasure and privilege to participate in this function for laying the foundation stone for the bank note paper mill. a special and hearty welcome to the hon ’ ble finance minister, shri pranab mukherjee, but for whose active support, the launch of this vital and prestigious project would not have been possible. 2. i want to use this opportunity to speak on this occasion to highlight the significance of paper currency, touch on the history of production of currency notes in india and then address certain issues in currency management. importantly, i would also like to outline the importance of this paper mill that we are launching today. 3. currency notes in circulation have increased significantly since the time rbi was established 75 years ago. the value of notes in circulation in the country has increased from about rs. 172 crore in 1935 to more than rs. 7, 00, 000 crore in 2009. in terms of volume, the notes in circulation have increased from 124 million pieces in 1935 to more than 51 billion pieces in 2009. in fact, after china, india is the largest producer and consumer of currency notes. 4. as the economy grows, people need more currency and other payment instruments to settle their transactions. notwithstanding several innovations in the field of payment and settlement, common people in our country, as indeed in many other developing countries, still use paper currency for their routine financial transactions. the ratio of currency with the public to gdp which was 12 per cent in 1951 is currently around 13 per cent demonstrating that currency still remains an important mode of payment in the country. it is the reserve bank ’ s responsibility, as the sole issuer of notes, to make available good and clean notes in adequate quantity to the public. history and evolution of production of notes in india 5. currency / bank notes are among the most mass - produced commodities in the world. the genesis of paper money is generally attributed to the token money that evolved around the 10th century in china. in india, the enthusiastic experiment by muhammed bin tughlaq in the 14th century to issue token money and replace silver taka with copper, though a genuine monetary experiment, ended in disaster. 6. use of paper money started in the west in the 17th