Fake currency supplied from across the border is a problem and steps are being taken to deal with it, finance minister P Chidambaram said on Thursday.
"Fake currency is a problem...This is a problem that arises from across the border," he said during Question Hour in Rajya Sabha.
Without naming any country, he said it is not possible to check supply of fake notes at the source itself as "there is a state support".
He, however, said India is getting good cooperation from Bangladesh and Nepal in dealing with the problem.
The finance minister said steps have been taken to prevent entry and circulation of fake currency.
Improving security features of bank notes and preventing entry of fake currency are ways to deal with the problem, he said.
The National Investigation Agency (NIA) is the nodal agency to deal with the problem of the counterfeit notes and steps are also being taken to install note sorting machines at bank branches, he said.
Chidambaram informed the House that with a view to increasing the life of bank notes, particularly in lower dominations, the RBI in consultation with government has been considering various options including printing of polymer bank notes.
He said a decision had accordingly been taken to introduce one billion pieces of Rs. 10 bank notes on polymer in a field trial basis in five cities.
"The primary objective of introduction of polymer/plastic notes is to increase its life and not to combat counterfeiting," the minister said.
He, however said he cannot say with certainty if polymer notes could check counterfeiting.
He said a study by The Energy and Resources Institute has found that polymer notes would be more environment friendly than paper currency.