ISLAMABAD: The government has turned down a plan of suspending varnish coating of high-denomination currency notes, deterred by fears that it will promote counterfeiting of banknotes.
The recent wave of Covid-19 pandemic, which emerged late last year in China and has now gripped almost the entire world, has posed risks of machinery breakdown and unavailability of necessary spare parts. This can disrupt the production of banknotes with specific security features in the country. Sources told The Express Tribune that the board of directors of State Bank of Pakistan (SBP) recommended the suspension of varnishing of high-denomination banknotes of Rs500, Rs1,000 and Rs5,000 for two months.
The Finance Division endorsed the recommendation of the central bank’s board and proposed that the use of protective varnish, called Sicpaprotect(R), in high-denomination banknotes may be suspended for two months.
However, the government argued that discontinuation of one of the security features would possibly lead to counterfeiting of banknotes.
It pointed out that huge cash disbursements were being made under the emergency cash relief programme and the discontinuation of varnish coating would not be prudent as the proposal was based on the presumption that the machinery would break down in the future. The SBP is currently issuing banknotes of Rs10, Rs20, Rs50, Rs100, Rs500, Rs1,000 and Rs5,000.
Based on an analysis of the security features used globally, conducted by the SBP in collaboration with the Pakistan Security Printing Corporation (PSPC), Security Papers Limited and Sicpa Inks Pakistan, the security features were introduced in 2017 to protect banknotes of higher denominations ie Rs500, Rs1,000 and Rs5,000 and ward off the threat of circulation of fake currency notes.
These features included increase in the size of optical variable ink (OVI) design by 10%, protective varnishing using Sicpaprotect and application of Sicpatalk (CBA) (R) infrared ink. They also included application of coloured magnetic ink Neomag(R) as an enhanced machine-readable feature. However, the Covid-19 outbreak has posed a new risk ie breakdown of the machinery and unavailability of spare parts that could severely disrupt the production of banknotes with specific security features.
The varnishing of banknotes enhances the life of currency, as confirmed by the PSPC lab. Thus, doing away with this feature will adversely impact overall integrity of banknotes and their life may become short.
In the prevailing situation, reliance on a single machine may be a more risky proposition as compared to the risk of doing away with the varnishing of banknotes for a temporary period.
The SBP did not respond to the request for comments till the filing of this story.
Published in The Express Tribune, May 27th, 2020.