Reserve Bank of India (RBI) has admitted to having circulated currency notes of Rs 1,000 denomination without the 'silver thread' security feature.
Sources told CNN-IBN on Tuesday that the notes were printed in the 5AG and 3AP series, but did not disclose how many were in circulation.
Absence of the silver security thread, which is a measure to check counterfeiting, makes a currency note invalid.
After the fault was discovered, the RBI issued instructions to all banks to provide exchange value in case consumers approach them with the faulty notes.
The faulty currency notes of Rs 1,000 were printed at Security Printing and Minting Corporation of India Limited (SPMCIL) at Hoshangabad in Madhya Pradesh, sources said.
In a letter dated December 14, 2015, the RBI - while admitting the goof-up - alerted the SPMCIL's Chairman and Managing Director about the faulty notes printed without the security feature.
"It has been brought to our notice that some notes in Rs 1,000 denomination with inset letter 'L' in the series 5AG and 3AP have been printed in which security thread is missing," the RBI letter read.
A high level inquiry has been initiated against the officials of the SPMCIL since silver thread is one of the most important security features in the Indian currency. The Union Finance Minister too asked for a report.
The incident has raised serious questions on safeguards when Indian agencies are already grappling with a fake currency racket in India.