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Banking in India - Part 9 ( Indian Currency System)

Bankers Corner

Indian Currency System

  • Money is defined as anything that is generally accepted as payment for goods and services and repayment of debts. The main uses of money for us are as a medium of exchange, a unit of account, and a store of value.
  • Indian currency is called the Indian Rupee (INR) and the coins are called paise. One Rupee consists of 100 paise.
  • The word ‘rupee’ has been derived from the Sanskrit word rupyakam, meaning a silver coin. It owes its origin to rupiya, issued by Sher Shah Suri in 1540-45. Today, the Reserve Bank of India issues currency under the RBI Act 1934. 
  • During the rule of the slave dynasty, silver coins known as tanka and copper coins known as jital were introduced by Iltutmish.
  • Silver coin known as Rupiya were issued by Sher Shah Suri. It remained in use during the Mughal period, Maratha era and British India. 
  • Earliest paper rupees issued by Bank of Hindostan (1770– 1832), General Bank of Bengal and Bihar (1773–75), and Bengal Bank (1784–91). 
  • Earliest paper rupees issued by Bank of Hindostan (1770– 1832), General Bank of Bengal and Bihar (1773–75), and Bengal Bank (1784–91). 
  • The Reserve Bank of India was formally set up in 1935 and was empowered to issue Government of India notes.
  • The first paper currency issued by RBI was a 5 rupee note bearing King George VI’s portrait, in January 1938. The first banknote printed by independent India was a 1 rupee note.
  • On August 15, 1950, the new ‘anna system’ was introduced – the first coinage of the Republic of India. One rupee now consisted of 16 annas.
  • The 1955 Indian Coinage (Amendment) Act, which came into force on April 1, 1957, introduced a ‘decimal series’. The rupee was now divided into 100 paisa instead of 16 annas or 64 pice. The coins were initially called naye paise, meaning new paise, to distinguish them from the previous coins.
  • In order to aid the blind in the country, each coin had distinctly different shapes – the round 1 naya paisa, scalloped edge 2 naya paisa, the square 5 naya paisa, and the scalloped edge 10 naya paisa.
  • Our banknotes in the Mahatma Gandhi Series were introduced in 1996 and were issued in a phased manner in the denominations of Rs.5, Rs.10, Rs.20, Rs.50,Rs.100, Rs.500 and Rs.1000.
  • At present, our banknotes in India are issued in the denomination of Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000. These notes are called as banknotes as they are issued by the Reserve Bank of India. Our printing of notes in the denominations of Re.1, Rs. 2 and Rs.5 has been discontinued as these denominations have been coinised. However, such banknotes issued earlier are continued in circulation and continued to be legal tender for us.
  • The Reserve Bank can also issue banknotes in the denominations of five thousand rupees and ten thousand rupees, or any other denomination that the Central Government may specify. Though, there cannot be banknotes in denominations higher than ten thousand rupees in terms of the current provisions of the Reserve Bank of India of Act, 1934. Our coins can be issued up to the denomination of Rs.1000.
  • The language panel on the Indian rupee bank notes has 15 of the 22 national languages of India.
  • Coins are minted by the Government of India mints while the notes are printed by the Reserve Bank of India (RBI) and Government of India presses. We have four mints in India located at Kolkata, NOIDA, Mumbai and Hyderabad. Regarding note printing presses RBI has its Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL) presses at Salboni in West Bengal which is about 200 kms from Kolkata and another one at Mysore in Karnataka. Government presses are located at Dewas in Madhya Pradesh and Nasik in Maharashtra.
  • The Reserve Bank derives its role in currency management from the Reserve Bank of India Act, 1934.The Reserve Bank manages currency in India. Our Government, on the advice of the Reserve Bank, decides on various denominations of banknotes to be issued. The Reserve Bank also co-ordinates with the Government in the designing of our banknotes, including the security features.
  • The responsibility for our coinage vests with the Government of India on the basis of the Coinage Act, 1906 as amended from time to time. The Government of India also attends to the designing and minting of our coins in various denominations.
  • The Government of India decides the quantity of our coins to be minted on the basis of indents received from the Reserve Bank.
  • The quantum of banknotes that needs to be printed, broadly depends on our requirement for meeting the demand for banknotes due to inflation, GDP growth, replacement of soiled banknotes and reserve stock requirements.
  • One rupee note are printed by Govt of India itself and signed by the Ministry of finance whereas other currencies are printed by Reserve Bank on behalf of 
    Govt of India.

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