India has set in motion a plan to rapidly indigenise currency note production with improved security features under the Modi-government’s signature `Make in India’ initiative as part of a focussed strategy to contain the spread of ‘near perfect’ Fake Indian Currency Notes (FICN).

Last month, the Reserve Bank of India (RBI) called for fresh bids for supply of currency security features. It cancelled two earlier tenders— invited in June 2015 and December 2015—and now makes it mandatory for potential suppliers to set up domestic manufacturing units within two years.

The move, besides giving a push to the government’s flagship `Make in India,’ initiative will also help prevent fake notes getting into the Indian banking system. Sources confirmed to Moneycontrol that Indian authorities are worried about possibility that organized international rackets may have access to the same source from where India imports materials for printing its currency.

For instance, the imported optically variable ink used in Indian currency notes is also being imported from the same source by Pakistan.

Sources, who did not wish to be identified, told Moneycontrol that one global firm have conveyed that it will set up a dedicated facility in Aurangabad for supply of security material for new Indian currency notes.

At present, the security features include watermarks, metal coated synthetic security thread and intaglio printing in the higher denomination notes of Rs 500 and Rs 2,000. The RBI has now called bids for supply of different types of security threads, advanced watermark and micro perforation, among others, most of which will have to be made in India.

The RBI tender document clearly states that a bidder with any commercial links to Pakistan and China will be seen with caution. “Operations of the bidder in Pakistan or China, if any, should be suitably firewalled from the contract / operations with India. The bidder shall also declare that no employee who has previously worked or been posted in Pakistan or China, in any capacity, will be engaged by the company for this procurement process,” it said.

The central bank also makes it clear that no Pakistani national or person of Pakistani origin should be engaged by the company for the project. The company should not post an employee who worked in India operations in Pakistan or China. If the entity is found indulging in acts inimical to India’s national security, the contract will be terminated, it said.

“Bidder may note that their acceptance of the ‘Make in India’...is a mandatory requirement for considering the bidder eligible,” RBI said while inviting pre-qualification bids for supply of security features for Indian banknotes.

All these steps are being in the backdrop of large number of fake notes of good quality that have been traced back to Pakistan as the point of origin, especially from cities like Lahore, Karachi, Quetta and Peshawar.

Certain West Bengal areas bordering Bangladesh and Nepal like Malda, Kalichuk and Murshidabad are emerging as hot spots for the actual smuggling and their distribution of FICN through smaller networks in India.

At present, one bank note paper line at Security Paper Mill (SPM), Hoshangabad run by the Secruity Printing and Minting Corporation of India Limited (SPMCIL) and two lines at Bank Note Paper Mill India Private Limited (BNPMIPL), a joint venture Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL) and SPMCIL, are operational and supplying paper for banknote printing.

The average paper required per year for producing currency notes is about 25000 million tonnes valued at around Rs.15000 crore.

Prospective suppliers, who have time till August 16, 2017 to submit their bid documents with the RBI bid documents, will have to clearly state their plans to set up “manufacturing facilities” in India within two years from the date of signing of the contract and increase the local content in planned manner from the third year.

It will also have to increase the domestic value addition to 35 percent in the third year, 40 percent in the fourth year and 50 percent or more in the fifth year.

Instances have also come to light that FICN are being injected into India through Nepal, Bangladesh and Thailand through air, land and sea routes. They are then deposited in Indian banks in these border districts along with Indian currency before being transported across the country mainly through trains for circulation.