How Currency is Issued in India?

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In India, the paper currency was first issued during British East India Company rule. The first paper notes were issued by the private banks such as Bank of Hindustan and the presidency banks during late 18th century. Via the Paper Currency Act of 1861, the British Government of India was conferred the monopoly to issue paper notes in India.

After this act, the government of India entered into agreements with the Presidency Banks to work as authorized agents to promote circulations of the paper notes across length and breadth of British India. But since India is a vast country, redemption of these notes became a issue soon. Consequently, some “Currency Circles” came up in various parts of country where the paper notes of Indian government were legal tenders.

In 1867, the agreements with the presidency banks were terminated. The job of promoting, circulating and redemption of the currency notes was entrusted to Mint Masters, Accountant General and the Controller of Currency. This practice continued till RBI came into existence in 1935.

Section 22 of the RBI Act 1934 makes provided that RBI has the sole right to issue Bank notes of all denominations. Thus, Reserve Bank is responsible for the design, production and overall management of the nation’s currency, with the goal of ensuring an adequate supply of clean and genuine notes. In consultation with the Government, the Reserve Bank routinely addresses security issues and targets ways to enhance security features to reduce the risk of counterfeiting or forgery of currency notes.

Key Landmarks: 

  • 1935 : Currency Function moved from Controller of currency to RBI
  • 1957 : Decimalization of coinage
  • 1995 : RBI sets up printing Press
  • 2000 : RBI mechanizes the currency processing
  • 2005 : RBI introduces Machine-readable security features

Paper Currency Notes

At present, paper currency notes in India are issued in the denomination of Rs. 5, Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1,000.  The printing of Rs. 1 and Rs. 2 denominations has been discontinued, though the notes in circulation are valid. Reserve Bank of India has been authorized to issue notes of Rs. 5000 and Rs. 10000 also. In fact, as per RBI act, RBI can issue any note of any denomination but NOT exceeding Rs. 10,000. The notes denomination is notified by Government and RBI acts accordingly.

Issue Department and Currency Department

RBI has a separate department called issue department whose assets and liabilities are kept separate from the Banking Department. Currency Management function of Reserve Bank is carried out at the “Department of Currency Management” located at Central Office Mumbai. There are 19 Issue offices. RBI authorizes selected branches of Banks to establish Currency Chests and Coin Deposits.  At present there is a network of 4281 Curency Chests and 4044 Small Coin Deposits.

Issue of Coins

The distribution of Coins is undertaken by RBI as an agent of the Government, (coins are minted by the Government and not by RBI). Coins up to 50 paisa are called “small coins” and coins of Rupee one and above are called “Rupee coins”.

Proportional Reserve System v/s Minimum Reserve System

Originally, the assets of the Issue department were to consist of not less than 2/5th of the Gold or sterling securities, provided Gold was not less than Rs. 40 Crores in value. Remaining 3/5th of the assets might be rupee coins. This was called “Proportional Reserve System”. In 1956, this system was changed. Now, RBI is required to maintain a Gold and Foreign Exchange Reserves of Rs. 200 Crore of which at least Rs.  115 Crore should be in Gold. This is called Minimum Reserve System. This system continues till date.

Currency Chests

Currency chests are storehouses where bank notes and rupee coins are stocked on behalf of the Reserve Bank. The currency chests have been established with State Bank of India, six associate banks, nationalized banks, private sector banks, a foreign bank, a state cooperative bank and a regional rural bank.

Deposits into the currency chest are treated as reserves with the Reserve Bank and are included in the Cash Reserve Ratio.

Locations of Note Printing Presses:

The Security Printing and Minting Corporation of India Limited (SPMCIL) prints the notes. It is a wholly owned company of the Government of India. Its printing presses are located at Nasik (Maharashtra) and Dewas (Madhya Pradesh). Apart from that, the Bharatiya Reserve Bank Note Mudran Pvt. Ltd. (BRBNMPL), a wholly owned subsidiary of the Reserve Bank, also has set up printing presses. The presses of BRBNMPL are located at Mysore in Karnataka and Salboni in West Bengal.

Security Printing and Minting Corporation of India Limited (SPMCIL) has 4 mints for coin production located at Mumbai, Noida, Kolkata and Hyderabad.

Coins and notes as Legal Tenders:

One Rupee Note and One Rupee coins are legal tenders for unlimited amounts. 50 Paisa coins are legal tender for any sum not above Rs. 10.  The coins of smaller than 50 paisa value are legal tenders of a sum below Re. 1.

Star Series Notes

The Star series notes are currently issued in Rs. 10, 20, 50 and Rs.  100. These notes are issued to replace the defected printed notes at the printing press. They have an additional character of a star and the bundles are NOT in series. Rest all the features are same.

Languages on Currency Notes

The amount of a banknote is written on it in 17 languages out of 22 official languages of India. The languages are Assamese, Bengali, Gujarati, Kannada, Kashmiri, Konkani, Malayalam, Marathi, Nepali, Oriya, Punjabi, Sanskrit, Tamil, Telugu and Urdu.

Last Updated: June 16, 2015

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Comments

  • ashishgangwar

    all of currency issued by RBI
    but 1rs currency is issued by government of India.
    why please tell me the reason?

  • ashishgangwar

    all of currency issued by RBI
    but 1rs currency is issued by government of India.
    why please tell

  • general knowlege manager

    hi buddy, ashish gangwar your question very good so that some behind that govt and rbi controll the money supply in india rbi is banker of govt ,so rbi only authority issued only note not that coins so govt of india issued coins and one ruppee note ,after that i will send some relevant data discuss our management well done study our website i ‘ll provide good data for your competitive exam ,good day everyone

  • pavan

    The Information here is so authentic. Thanks for posting it.

  • usman

    why the coins of different value r of same size?eg,coins of 50 paise 5 rupee 1rupee and 2rupee? why cant they be changed in size as per their value? what is the logic behind this?

  • deepak sukhwak

    hi i m deepak..your question is why rbi not isue one rupee note.the answer is rupee is a currency of india. so central govt is issue but after other note is only a promessary note.you saw in a note ‘i promise to pay the bearer tum sum of rupe..rbi is work of behind of the govt..i hope u understand

    • Dhirendr Devarshi

      A few years ago coins of different denominations were of different size and shape. India is one of few countries who have tried a variety of shapes for coin production but it appears that recently we have decided to zero in to circular shape only. You may be knowing that 1 paisa coin was issued in two shapes, 2 paisa coin had a wavy margin. 3 paisa coin was polygonal, so was 20 paise coin (second issue). 5 paise coin was rectangular.

  • Archana

    The articles are very good on this site. I request to the owner please provide more and more articles on banking related to current issues and basics of Banking.

  • himpat.verma

    i wish to know about rights and duties of currency chest branches. what is the area of operation? if any bank has currency chest and also handling clearing house,can that branch make frequent payment to clearing member branch if needed? i m branch head in SBOP and SBI is having currency chest and also conduct clearing house. SBI refuse us to make cash payment from our current accoun tell us to get the currency from your currency chest which are 200 kms away. kindly provide me solution.

  • Raghu

    pls explain me…..
    What is the sum of the total currency available in india equal to i.e, is there any constraint ???

  • suji

    is there any limitations for RBI to print indian rupees i mean the total sum of amount to be printed at a time

  • priya mendis

    I love this site the most useful one forthe general knowledge about Indian fields of education!!

  • Meblog

    Very good site

  • Satyarth soni

    At what condition rupee are made? Is it manufacturing is somehow related to new reserve found in india? I mean that the value of reserve newly found, currency of that value is issue by RBI. Plz tell me

  • Devarshi

    Has RBI stopped priniting of 5 Rupees note? If yes, since when. Was a 5 rupee note with rupee logo ever printed?

  • bhushan

    why indian coin use in without sign,but other note are require d to signiture

  • VIVEK

    HI..
    My question is that …how its decided that what amount of new notes to be issued on new coins to be minted .Is there any protocol for this.
    why can’t India print required numbers of notes and get rid of its debts…
    Sir plzz explain.

  • Daljit Singh

    Very nice article indeed and so are some of the comments.
    I need to know:
    1.Is there anything in the Indian constitution that ways who shall produce money- government itself or some other agency ? Apparently except one rupee note, rest of the money is produced by another agency.
    2.Does the government procure “interest free”/debt free money from RBI, or does it bind itself (bond) and does it pay interest on the money procured from RBI?
    3.Why the interest rates in India are so high for the public, compared to the countries in the West ?

  • saranya

    it is a very good article , help me know about Indian currency & money

  • latief ahmad

    Is a 10 rupee coin issued by rbi or govt.of india

  • rahul shinde

    where are?old british india paper money i purchase!

  • captain chitta srinivas

    what is the regulation regarding abuse of utilising the currency notes at political meetings and places of worship when they are used in the form of barlands for deities and political leaders

  • captain chitta srinivas

    what is the regulation regarding abuse of utilising the currency notes at political meetings and places of worship when they are used in the form of garlands for deities and political leaders

  • Madhukar

    I want some 200 to 300 one rupee coin, can you please let me know the Bangalore address as I am new to Bangalore. Thanks in advance.
    Madhukar

  • bibi

    plz explain me what are scientific processes involved in making of notes and coins?

  • Arun

    tell me any fake currency checking machine rbi aproved ?

  • Devendra Chittuluru

    Where can I get rupee coins in Bangalore. Is it at RBI?. If yes, can I just walk in and get the coins over the counter?

    Looking at the currency chest bank list in the RBI website, I approached Vijaya bank, MG Road in Bangalore. They said, they will give coins only if I show a letter from RBI.

  • Kartik raval

    Sir
    Plz help it
    I wann by new 1 rupees note
    Were go 2 I ll giv it

  • sayoushi

    how it is decided that in what amount/no. the currency notes will be printed

  • avantika123456

    Pretty precise and accurate gist of important events about currency notes of India.