Currency System in India – RBI’s Role

1. Currency System in India – RBI’s Role Currency Management – Provisions under RBI Act, 1934

2. Section 22 of RBI Act • In terms of Section 22 of RBI is the sole authority for issue of currency in India including one rupee coins/notes. • One rupee coins/notes are issued by the Government of India but put into circulation through RBI. • RBI took over the function of issue of notes from GOI from April 1, 1935. • Actual notes were issued by RBI only in January 1938 and until then Bank was issuing currency notes of Government of India.

3. What is a Banknote? • Banknotes are Indian Currency Notes authorized to put into circulation among public only by Reserve Bank of India (RBI). Since RBI is the sole authority to issue notes they are called Banknotes.

4. What is a Currency Note? • Currency Note is the same banknote pertaining to our Nation – Indian Currency Note is called Indian Rupee (INR)

5. Notes issued by RBI • At present, banknotes in India are issued in the denomination of Rs.10, Rs.20, Rs.50, Rs.100, Rs.500, Rs.1000. • Banknotes issued by RBI in the denominations of Rs.2 and Rs.5 has been discontinued and replaced fully with coins. • Bank can also issue notes in the denomination of Rs.5000 and Rs.10000 • Notes of higher denominations of Rs.1000,Rs.5000 and Rs.10000 issued earlier (before 1946 and 1954) have been demonetized in 1978 and are no longer in circulation. • Rs.500 demonetized in 1946 were reintroduced in 1987 and in the year 2000, Rs.1000 notes were reintroduced.

6. Rupee coins and Small coins • Rupee coins and Small coins are issued by Government of India through RBI. • Rupee coins are Re.1, Rs.2 and Rs.5 and Small coins are issued in the denominations of Ps.25 and Ps.50. The highest denomination of coin that can be issued by GOI is Rs.1000 as per Section 6 of Coinage Act, 1906.

7. Printing of Notes and Minting of Coins • Notes are printed by Government of India at its printing presses at Nashik and Dewas and at the presses of Bharatiya Reserve Bank Note Mudran Private Ltd. (BRBNMPL) at Mysore and Salboni. • Coins are minted at the four Government Mints at Mumbai, Kolkata, Noida and Hyderabad. • Presses are required to produce around 12,000 million pieces of notes per annum to maintain clean notes in circulation. • The average life of a note in circulation varies from 1 year to 2 years. • The cost of production of banknote is reimbursed by the Bank to the Press and the cost of production of coins is borne by GOI itself. • The design, form and material of the bank notes are recommended by Central Board of Directors of RBI and approved by GOI.

8. Issue of Notes and Coins • The issue of fresh notes and coins is conducted by RBI in the Issue Department. • These fresh notes are stocked the Currency Chest of RBI and other agencies. • The currency chest is provided to a branch of public sector bank or to a Government Treasury, which has opted to function as an agent of RBI. • Thus we have as on June 2007 a wide net work of 4,301 currency chests and 4,027 small coin depots apart from 18 Issue Offices, a sub-office at Lucknow and a currency chest at Kochi of Reserve Bank of India.

9. Clean Note Policy • Ensuring adequate availability of good quality banknotes and coins is one of the core functions of RBI. • Towards this various measures were initiated by RBI – viz. speedier disposal of soiled banknotes, discontinuance of the practice of stapling of note packets, supply of adequate quantity of fresh notes to banks and mopping up of soiled and mutilated notes, particularly notes of lower denominations from circulation, regular removal of soiled banknotes from the currency chests and acceleration in mechanized processing of the notes at the offices of the RBI as also at Currency Chests by installing CVPS and SBS. Thus, there has been marked improvement in the quality of banknotes in circulation. • Reserve Bank of India has been continuously making efforts to make good quality banknotes available to the members of public.  To help RBI and banking system, the members of public are requested to ensure the following: • Not to staple the banknotes • Not to write / put rubber stamp or any other mark on the banknotes • Store the banknotes safely to prevent any damage

10. Notes and Coins in circulation – Data as on March 2007 (source: Annual Report- 2007) • As on March 2007 - 38,831 million pieces in all denominations of banknotes valued at Rs.4,96,138 crores are in circulation. • In volume terms, Rs.100 denomination notes had the largest share (34% of the total pieces in circulation) and in terms of value Rs.500 denomination notes had the largest share (45% of the total value of banknotes in circulation). • Rupee Coins and small coins to the extent of 90,357 million pieces valued at Rs.8,021 crores are in circulation. • In view of the reported mellting of Rs.2 cupro nickel coins due to rising metal prices, the GOI in consultation with the RBI decided to mint all denominations coins in ferritic stainless steel (FSS). • The volume of banknotes supplied to the public during 2006-07 is to the tune of 11,472 million pieces valued at Rs.1,84,561/- crores

11. Conclusion • RBI has opened its Monetary museum at Mumbai on 18th November 2004. The Museum is the first of its kind in the country and depicts the history of currency and the evolution of money in India. • The administrative arrangements made by RBI for the discharge of currency management functions are founded on the mechanism of currency chests. • The basic concept on currency matters, master circulars and press releases issued from time tot time for common man is available on our website www.rbi.org.in. • Thank you!