In the past few months, police in the region have seized a large number of fake notes from different towns, the biggest haul being reported from Aizwal, the capital of Mizoram.

Last month, Aizwal police seized fake Rs 500-denomination currency notes totalling Rs 86,500 from two persons arrested from a village on the Mizoram-Manipur border. DIG of police Deepak Mishra later said that fake notes to the tune of Rs 1.25 lakh had been circulated across the region by the duo over the past year.

Mishra said the two ``sold'' the fake notes to people at the rate of Rs 40 for a Rs 100 note and Rs 400 for a Rs 500 note. They printed these notes with the help of a high-quality photo-copier-cum-colour printer believed to be smuggled from Singapore by another of their associates.

``It could be the handiwork of the ISI ofPakistan, aimed at destabilising the economy in this part of the country,'' said one intelligence officer here, adding that the matter came up for serious discussion at the recent high-level meeting of the region's police chiefs held in Guwahati, and attended among others, by Union Home Ministry joint secretary S K Pillai.

The notes penetrated the market so well that around 150 of the Rs 500 notes even found their way to the Reserve Bank of India as part of the currency chest it received from the State Bank of India's Shillong branch.

Since then, the SBI in the Meghalaya capital has refused to accept notes of Rs 500 denomination, causing people some trouble.

Fake currency notes have also alarmed police in Tripura, compelling it to direct banks to set up ultra-violet devices to detect them and hand over people found trying to deposit these notes. Tripura police also claimed it had proof that Pakistan's ISI was involved in the racket.

According to K T D Singh, DGP of Tripura, ISI was pumping in fakecurrency notes into the state alongwith guns, ammunition and other contraband items, often with the help of various insurgent groups.

But the RBI here does not see it as a major problem. ``The matter is not as alarming as reported in a section of the Press. As far as the ISI's involvement is concerned, it is up to the police and intelligence agencies to confirm it,'' said an official of the RBI here.

However, the RBI has alerted banks all over the region to take utmost care while accepting notes of higher denomination, especially the Rs 500 notes.