It has been three years since the decision on demonetisation. On November 8, 2016, Prime Minister Narendra Modi announced that the Rs 1,000 and Rs 500 note would no longer be legal tender.

There have been arguments both for and against. However here we take a look at how the decision had an impact in India’s war against terror. The aftereffects of demonetisation were first felt in the Naxalite strongholds.

Also read: 3 years since demonetisation: How this decision helped India’s war against terror

The effects were also felt by those who were printing and circulating fake currency in the Indian markets. Further, it also affected the operations of terrorists who had stashed up money for the procurement of weapons.


Pakistan and its notorious network of agents had mastered the art of producing fake currency. By 2010, the agencies had hit the panic button as the fake currency started to look extremely original.

The silver bromide threads were no longer hazy, the three watermarks, Ashoka Pillar, denomination and Gandhi’s caricature had started to look more prominent. It had become tougher to spot the sprinkled dots when the fake note was held up against an ultraviolet light. This was due to the marked improvement in the printing quality. Further Pakistan had started to source the paper directly from the United Kingdom. Prior to this the paper was shoddy and was being made from wood pulp.

Further the problem of the series prefix being smaller in size had been rectified. The alignment of the series prefix and the distinctive numbers had been placed in a correct line. The racketeers also managed to correct the continuity of the security thread apart from the alignment of the register on the left-hand side of the water mark.

Rough estimates showed that in the years between 2010 and 2012 the fake currency in circulation was an estimated Rs 12 lakh crore.

Post the decision on demonetisation, this industry took a severe hit. A lot of money which was in circulation became useless and for a considerable amount of time, Pakistan was unable to pump in fake currency. There were attempts a few months after the decision, but that was easily detected by the naked eye.

There was no doubt that Pakistan was ready to let go of its ambitious project of flooding the Indian economy with fake currency once again. This meant that they had procure fresh equipment to match the security features and if one looks at the fake notes that have been seized after demonetisation, one can tell the difference quite easily. An NIA officer who has been probing cases of fake currency at Malda in West Bengal tells MyNation that it would not be right to say that the menace has ended. They are criminals and they will continue to do what they do. The officer says that they have not been able to perfect the note, especially the Rs 2,000 denomination. There are still many grey areas in those notes which have made detection easier. However, it is an ongoing concern and we need to be on our toes at all times, the officer further added.

In 2018, the RBI in its annual report said that the overall detection of fake notes was 522,783 pieces in 2017-18 when compared to 762,072 pieces in 2016-17. The report said that this was 31.4% lower.

Finance minister Nirmala Sitharaman in July informed the Lok Sabha that there was a declining trend in the circulation of fake currency. There have been no reported cases of seizure of high-quality fake currency till early 2019 as there does not appear to be any appreciable loss. The FICN Coordination Group had been formed by the ministry of home affairs to share intelligence among the state and central security agencies.

Terror funding:

In Jammu and Kashmir, the decision on demonetisation dealt a body blow to the terrorists and separatists in Kashmir.

The separatists in particular received money through hawala transactions and post the decision on demonetisation, it came down drastically. The NIA which is probing the J&K terror funding case says that in 2018, the hawala transactions had come to a halt.

The investigation agencies learnt that most of the money was coming into the Valley in cash and post demonetisation, this had come down to a large extent. In the terror funding case, it was found that 95% of the money moved into the Valley was through hawala. It was learnt that the hawala money would be first moved into Delhi, following which it would be transported to the Valley. Post demonetisation, the hawala transactions witnessed a major dip.

Demonetisation coupled with the grit of the Central agencies also applied the brakes on the coffers of the separatists. Money was being pumped into the coffers of the Hurriyat Conference, JKLF, Islamic Students Front, Hizbul Mujahideen, Jaish-e-Mohammad and Jamiat-ul-Mujahideen.

The agencies also found that on many occasions fake currency too was pumped in. The currency changed hands in Delhi and was later moved into the Valley. However, post demonetisation, the supply of fake currency came to a grinding halt. Even the hawala transactions had come down considerably in the latter half of 2018, the NIA learnt.

Further the NIA also learnt that the money pumped in was the highest between 2009 and 2012. An estimated Rs 12 million had been sent to the Valley to foment terror and trouble.

The stone pelters were paid by cash and post the decision on demonetisation, the money flow in this direction too dropped considerably. NIA officials say that the likes of Syed Ali Shah Geelani, it was found that he had in the early 1990s, he had received money to the tune Rs 190 million from Saudi Arabia. Further he had also received a donation of Rs 100 million from the Kashmir American Council.

Naxals most hit:

The decision on demonetisation however has hit the Naxalites the hardest. In its latest chargesheet, the National Investigation says that a case was registered in Ranchi when demonetised currency to the tune of Rs 25.38 lakh was deposited by the Naxalites into the bank account of a petrol pump.

The Naxals who held crores of rupees had tried to deposit the money in various banks and cooperative societies post demonetisation. In one case it was found that Rs 3 lakh had been deposited in the Sahara Credit Cooperative Society. Money was also being deposited into mutual funds.

The intercepts picked up by intelligence agencies suggest that the Naxalites had been discussing losing money post demonetisation. All this money was collected by them through extortion and levy. The annual money collection stood at around Rs 1,500 crore.

Post demonetisation all the money that had been collected had to be discarded as they were unable to exchange a large sum of the same. Only a few lakhs made it to the banks and cooperative societies. However, all this has been traced by the investigating agencies and seized.

Post demonetisation there was a lot of propaganda activity by the CPI (Maoist). Through social media posts they publicly opposed demonetisation. Many held protests in Delhi and Kolkata to protest the decision. The Intelligence Bureau which kept a close tab on these protests said that this was directly linked to the huge loss of cash by the Naxalites post the decision that was taken on November 8, 2016.