How Currency is Issued in India?

In India, the paper currency was first issued during British East India Company rule. The first paper currency issued in India was the Re. 1 note. The first paper notes were issued by the private banks such as Bank of Hindustan and the presidency banks during late 18th century. In those times, there were Government issued notes also but government had no monopoly in issuing paper notes.

Via the Paper Currency Act of 1861, the British Government of India was conferred the monopoly to issue paper notes in India.

Currency Circles

After the 1861 act, the Government of India had the monopoly to issue paper notes in India. But since making those notes popular was a difficult task in such a vast country; the government  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.

However, there were several limitations. The lack of mobility, lack of development and lack of education resulted in a major issue in redemption of these notes. Consequently, there were only some areas (such as major cities and nearby areas) in various parts of country, where the paper notes of Indian government were legal tenders. These areas were called “Currency Circles”.

Controller of Currency

The agreements with the Presidency Banks to promote and popularize the bank notes was terminated in 1867. Subsequently, 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.

In which year the currency function moved from Controller of Currency to RBI?

Section 22 of the RBI Act 1934 makes provided that RBI has the sole right to issue Bank notes of all denominations. Thus, on 1 April 1935, 1935, the currency function moved from Controller of Currency to RBI. Today, 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.

Decimalization of Coinage

When India got freedom, the basic unit of Indian currency was 1 Rupee which could be divided  into 16 Annas (आना) or 64 pice (पाई); pice was old spelling of paise. At that time, lowest denomination of Indian Rupee was Half-Pice, which became obsolete in 1947. At that time, the Government minted One Rupee, Half Rupee, Quarter Rupee, Two Annas, One Anna, Half Anna and One Pice coins.

This 16 Anna and 64 Pice structure remained till 1957, when decimalization of the coinage was done. Henceforth, spelling of “pice” was changed to “Paisa” and 1 Rupee was divided into 100 Paise. This is called Decimalization of Coinage and it took place in 1957. The 100th part of Rupee was now called Naya Paisa. The term “naya” was dropped in 1964.

Role of RBI in coins in India

The distribution of Coins is undertaken by RBI as an agent of the Government, (coins are minted by the Government and not by RBI).

However RBI is the only source of legal tender money because distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as agent of the Government.

Current Paper Notes in Circulation

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 as per the Coinage Act 2011.

  • In February 2015, it was reported that RBI will again put in circulation rupee one notes after a gap of 20 years.

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.

Signature on currency notes

Under Section 22 of the Reserve Bank of India Act, RBI has sole right to issue currency notes of various denominations except one rupee notes. The One Rupee note is issued by Ministry of Finance and it bears the signatures of Finance Secretary, while other notes bear the signature of Governor RBI.

Proportional Reserve System and 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.

First printing press in India for bank notes

Currency Note Press (CNP), Nasik, Maharashtra was established in 1928. It was the first printing press for bank notes in India.

Locations of Various Bank Note Press

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.

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.

Issue Department and Currency Departments of RBI

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 Currency Chests and 4044 Small Coin Deposits.

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Comments

  • ashishgangwar
    Reply

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

  • ashishgangwar
    Reply

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

  • general knowlege manager
    Reply

    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
    Reply

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

  • usman
    Reply

    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
    Reply

    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
    Reply

    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
    Reply

    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
    Reply

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

  • suji
    Reply

    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
    Reply

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

  • Meblog
    Reply

    Very good site

  • Satyarth soni
    Reply

    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
    Reply

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

  • bhushan
    Reply

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

  • VIVEK
    Reply

    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
    Reply

    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
    Reply

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

  • latief ahmad
    Reply

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

  • rahul shinde
    Reply

    where are?old british india paper money i purchase!

  • captain chitta srinivas
    Reply

    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
    Reply

    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
    Reply

    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
    Reply

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

  • Arun
    Reply

    tell me any fake currency checking machine rbi aproved ?

  • Devendra Chittuluru
    Reply

    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
    Reply

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

  • sayoushi
    Reply

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

  • avantika123456
    Reply

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