CURRENCY NOTES

INTRODUCTION

Currency notes are one of the most vital elements of economic activities. It is synonymously related to money which is considered as a medium of exchange. It can also be referred to as banknotes. These notes are called banknotes as they are issued by the Reserve Bank of India (Reserve Bank). The printing of notes in the denominations of Rs 2 and Rs 5 has been discontinued as these denominations have been coined.  It is a negotiable promissory note which one party can use to pay another party a specific amount of money.

A banknote is payable to the bearer on demand, and the amount payable is apparent on the face of the note. Banknotes are considered legally binding on every sphere of economic activities. Paper currency first developed in Tang dynasty China during the 7th century, although true paper money did not appear until the 11th century, during the Song dynasty. The usage of paper currency later spread throughout the Mongol Empire or Yuan dynasty China. Afterwards, it was circulated to India through their diplomatic trade relations. 

HISTORY OF INDIAN CURRENCY NOTES

The management of paper currency across the geographical expanse of the Indian subcontinent was a task of considerable proportions. Initially the Presidency Banks were appointed as agents to promote the circulation of these notes in view of their existing infrastructure. The Act of 1861 authorized the Presidency Banks to enter into agreements with the Secretary of State for becoming agents for the issue, payment and exchange of promissory notes of the Government of India. The problem of redemption of these notes over vast expanses of the Indian sub-continent led to the concept of ‘Currency Circles’, where these notes were legal tender.

These Currency Circles increased in number as the Government progressively took over the work. The agency agreements with the Presidency Banks were finally terminated in 1867. The Management of Paper Currency was subsequently, in turn, entrusted to the Mint Masters, the Accountant Generals and the Controller of Currency.

British India notes were the ‘Victoria Portrait’ Series issued in denominations of 10, 20, 50, 100, 1000. These were unifaced, carried two language panels and were printed on hand-molded paper manufactured at the Laverstock Paper Mills (Portals). The security features incorporated the watermark (GOVERNMENT OF INDIA, RUPEES, two signatures and wavy lines), the printed signature and the registration of the notes. The Victoria Portrait series was withdrawn in the wake of a spate of forgeries and replaced by the unifaced ‘Underprint Series’ which were introduced in 1867. In deference to public demand, notes in the denomination of Rupees Five were introduced. Initially, notes were legally encashable only in the Currency Circle in which they were issued; however, between 1903 and 1911, notes of denomination 5, 10, 50 and 100 were ‘universalised’, i.e. were legally encashable outside the Currency Circle of Issue.

The Underprint Series notes were printed on molded paper and carried 4 language panels (Green Series). The languages differed as per the currency circle of Issue. Language panels were increased to 8 in the Red Series. The improved security features included a wavy line watermark, the manufacturer’s code in the watermark (the source of much confusion in dating), guilloche patterns and a coloured underprint. 

The introduction of small denomination notes in India was essentially in the realm of the exigent. Compulsions of the first World War led to the introduction of paper currency of small denominations. Rupee One was introduced on 30th November, 1917 followed by the exotic Rupees Two and Annas Eight. The issuance of these notes was discontinued on 1st January, 1926 on cost benefit considerations. These notes first carried the portrait of King George V and were the precursors of the ‘King’s Portrait’ Series.

It began operations by taking over from the Government the functions hitherto performed by the Controller of Currency and from the Imperial Bank the management of Government Accounts and Public Debt. The existing Currency Offices in Calcutta, Bombay, Madras, Rangoon, Karachi, Lahore and Cawnpore became the branches of the Issue Department of the Bank. (It was not then considered necessary to have an office in Delhi.).

Section 22 of the RBI Act, 1934, empowered it to continue issuing Government of India notes till its own notes were ready for issue. The Central Board of the Bank recommended that the Bank notes retain the general size, appearance and design of the existing notes, albeit with modifications.

With the commencement of the Reserve Bank of India notes with the portrait of Edward VIII were scheduled for release in the summer of ’37. But Edward’s heart had its reasons and his abdication, at levels mundane, delayed the Bank’s issues to January 1938 when the first Five Rupee note was issued bearing the portrait of George VI. The George VI series continued till 1947 and thereafter as a frozen series till 1950 when post independence notes were issued.

DEMONETIZATION OF CURRENCY NOTES TO SAVE THE ECONOMY

Demonetization is the act of stripping a currency unit of its status as legal tender. It occurs whenever there is a change in national currency. The current form or forms of money is pulled from circulation and retired, often to be replaced with new notes or coins.It is said that 38 years ago, in the year 1978, right after emergency was lifted from India, Janta Party government led by another politician from Gujarat Prime Minister Morarji Desai, had decided to demonetise Rs 1,000, Rs 5,000 and Rs 10,000 notes in a bid to combat corruption and black money. Prime Minister Narendra Modi’s announcement on November 8 to demonetise notes of the denomination of Rs 500 and Rs 1000 has a precedent. This infographic traces some interesting demonetisation initiatives around the world. From discontinuation of high denomination notes due to lack of circulation, to the use of beer and water as ‘real assets’ in place of hyper-inflated currency.  

CONCLUSION

Currency notes is a generally accepted form of payment, including coins and paper notes, which is circulated within an economy and usually issued by a government. Now , virtual and cryptocurrency will provide a base for the strengthening of the Indian economy but, it should be used very carefully so as to safeguard our economy from the drawbacks of excessive inflation and deflation. Thus, it is an essential aspect of our developing economy.

REFERENCE

http://www.rbi.org

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