The Indian Border Security Force’s deputy inspector general, Rajesh Gupta, holds a fake Indian rupee during a news conference near the India-Pakistan border in February. (NARINDER NANU/AFP/GETTY IMAGES)

Of all the threats that India tries to keep from spilling across its borders, one has been particularly difficult to block: fake Indian rupees printed in Pakistan.

Bank transactions involving counterfeit currency increased 400 percent in the past year, according to India’s Finance Ministry, and officials in the capital made a record seizure of fake cash during a search of fabric shipments from Pakistan this year.

Officials say Pakistani groups produce the high-quality fake notes and use them to fund terrorism and drug networks in India. Counterfeiting is also a form of economic sabotage, the officials say, that could deter global investors if left unchecked.

The high quality of the notes indicates that sophisticated machines are used to make them, the officials say, adding that such equipment is available only to governments. The fakes typically have security features found in genuine notes, such as watermarks, silver security threads and micro-lettering, intelligence reports say.

In Islamabad, a senior security official rejected the suggestion that the Pakistani government is involved. “This is an old allegation — it has been going on for years now,” the official said. “There is no truth to it whatsoever.”

Activists of the banned Students Islamic Movement of India and militants from the outlawed Pakistani group Lashkar-i-Taiba who were arrested in the past four years were found with fake currency in their possession, according to India’s National Investigation Agency. In the southern state of Andhra Pradesh, police say, Maoist insurgents have also begun using fake notes.

Under Indian law, carrying and using counterfeit currency is punishable by up to seven years in prison. But security officials are now debating a proposal that would make currency counterfeiting an offense related to terrorism that could carry a life sentence.

Counterfeit currency is smuggled into India along with weapons or drugs, or is hidden in legitimate cross-border trade, officials say. In the New Delhi seizure, for example, police found about $460,000 in fake money in a search of two truckloads of fabric from Pakistan. The notes were hidden in cardboard boxes that the fabric was wrapped around, police said.

“These trucks came from Pakistan through the regular trade route across the border. The fabric wrappings had Pakistani labels,” said Rajan Bhagat, a deputy commissioner of police in New Delhi. “The fine texture and security features in these fake notes were very similar to the genuine Indian currency. It is very difficult for a common man to tell the difference.”

Customs officials have also seized fake cash on passenger and cargo trains running between India and Pakistan along the border of the Indian state of Punjab.

One official said catching low-level carriers of counterfeit money does not directly lead investigators to specific information about the people who run the rackets in Pakistan. But the notes “cannot be printed so accurately without the blessing or patronage of Pakistan’s intelligence agency,” said an intelligence officer who has interrogated suspects accused of carrying fake currency into Punjab from Pakistan.

“In Punjab, it is carried across the border by professional border-crossers in mixed consignments along with drugs, guns and ammunition. Just bringing fake currency does not offer huge profit margins, so it is always mixed with other things,” the officer said, speaking on the condition of anonymity because he was not authorized to give his name.

Nepal and Bangladesh have also emerged as transit points for counterfeit cash originating in Pakistan, officials say. Agents in India pick up bundles of notes that have been thrown over the porous border with Bangladesh into villages on the Indian side.

In January, the National Investigation Agency arrested 14 people accused of distributing counterfeit money. Officials said the suspects had ties to coordinators in Pakistan and Bangladesh.