Prime Minister Manmohan Singh on Sunday favoured coordinated approach by the central as well as state agencies to check the menace of counterfeit currency notes.

Singh asked state governments to thoroughly investigate cases related to recovery of fake currency and set up state level committees for continuous vigilance.

"There are indications that fake Indian currency notes are printed and smuggled into India from outside the country.

There is obviously a need for a coordinated approach by the central and state agencies to tackle the menace, which has serious implications for our economy," he said at the Chief Ministers' Conference on Internal Security in New Delhi.

"In some instances of recovery of fake currency, especially by banks, there has been a reluctance to register the First Information Report. This must be avoided and all such cases must be thoroughly investigated.

"You could also designate a nodal agency to investigate cases of seizure or recovery of fake Indian currency notes and set up a state-level committee for continuous vigilance in the matter, as has been already suggested by the Ministry of Home Affairs," the prime minister said.