Australia's banknote firm 'Securency' appointed Khanna, a businessman, and his Delhi-based firm DSSI Group to help get its plastic banknotes circulating in India.
According the sources, Khanna is related to senior politician Natwar Singh, and has been raided by Indian police in connection with suspect arms deals.
The sources said that a DSSI Group executive confirmed his company's link to Securency.
However, Reserve Bank of Australia (RBA) refused to comment on the matter.
Like the wheat marketing company AWB Ltd of Australia, Khanna was named in the UN Volcker inquiry in 2006 as having profited from oil-for-food programme contracts that included kickbacks to Saddam Hussein's regime in Iraq.
The revelation of Khanna's role with the RBA firm is likely to embarrass the Australian and Indian governments and their central banks, especially after Securency recently won a contract from the Reserve Bank of India to supply one billion polymer banknotes for a trial.