In a development that should worry the government which hoped that terror funding had been badly hit by the demonetisation of Rs 1,000 and Rs 500 notes, new currency notes were recovered from the possession of the terrorists who were killed in an encounter on Tuesday in Jammu and Kashmir.
Currency notes of Rs 2,000 denomination were among the items recovered from the two terrorists who were killed in the encounter with security forces in north Kashmir’s Bandipora district.
Acting on specific intelligence inputs about the presence of terrorists in Hajin village of Bandipora, security forces had on Tuesday launched a search operation in the area.
As the forces were conducting the search operation, the terrorists fired upon them, leading to an encounter in which two terrorists were killed.
"The currency has been handed over to police for further probe as to where from the currency notes were obtained by the terrorists," a senior army official said.
"From the appearance, they (slain militants) seem to be foreigners... when they had infiltrated into the valley will be known in due course of time," he added.
The identity and group affiliation of the terrorists are still being ascertained.
The recovery, perhaps the first since the government announced the demonetisation move on November 8, has rung alarm bells as government agencies had expected that the hawala channels through which terror funds flow would run dry after the the scrapping of Rs 500 and Rs 1,000 notes.
Experts have been saying that the impact of demonetisation on terror activities will be felt in the immediate future, but the long term benefits are questionable.
In a policy brief for the Institute of Defence Studies and Analyses, Col Vivek Chadha (Retd) writes: 'Pakistan and J&K based terror groups while impacted, will be able to recuperate faster, as they are financed by the Pakistani State, rich donors in West Asia, voluntary collections in Pakistan, FICN or drug money. None of these can be impacted in the long term and to the extent that terror organisations are unable to sustain themselves. However, the impact will certainly be felt in the immediate and midterm future, wherein, the cash available for sustaining activities like civil disobedience in Kashmir Valley, will be sucked out of the terror economy.'