Questions on different aspects of currency are an important part of Static GK and have often been asked in banking and other competitive exams. If you are preparing for IBPS PO, RRB Clerk, RRB PO, RBI Grade B etc. this topic becomes very important in your preparation. The good thing about Static GK is that the answers don’t change with the passage of time. You memorize it once and keep revising it at regular intervals and you can answer Static GK answers quickly. You can download all the important Static GK PDFs here. Remember, if memorizing them is half the battle won, revising them on a regular basis is the other half of the battle.
In other words, you have to keep revising the Static GK study material on a regular basis. We have covered a majority of the Static GK topics in the form of PDFs so that you can revise them easily. Start downloading the Static GK PDFs and make the most of the Static GK questions. In this article, we have come up with the details of currency management in India where we brief you about the history as well as its current status. Have a look and improve your score in Static GK.
Management of currency is one of the core central banking functions of the Reserve Bank of India. The Reserve Bank of India, along with the Government of India, is responsible for the design, production and overall management of the nation’s currency.
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.
History of Currency:
The Paper Currency Act of 1861 conferred upon the Government of India the monopoly of note issues, thus ending the practice of private and presidency banks issuing currency. Between 1861 and 1935, the Government of India managed the issue of paper currency.
In 1935, when the Reserve Bank started operations, it took over the function of note issue from the Office of the Controller of Currency, Government of India.
Currency Management is the process of managing the life cycle of the notes, which includes assessing the printing requirement of various denominations of notes, placing indents with the note printing presses, supplying and distributing adequate quantity of currency throughout the country and ensuring the quantity of banknotes in circulation by continuous supply of clean notes and timely withdrawal of soiled notes.
The quantity of notes that is required to be printed is decided by RBI using econometric analysis based on various factors, such as:
- Real GDP growth prospects
- Rate of inflation
- Disposal rate of denomination wise soiled bank notes
- Notes in circulation
- Reserve position and incremental requirement, etc.
Bank notes are printed at four currency presses:
- Two of which are owned by the Government of India through its Corporation, Security Printing and Minting Corporation of India Ltd. (SPMCIL) and
- Two are owned by the Reserve Bank, through its wholly owned subsidiary, Bharatiya Reserve Bank Note Mudran Private Ltd. (BRBNMPL). The currency presses of SPMCIL are at Nasik (Maharashtra) and Dewas (Madhya Pradesh). The two presses of BRBNMPL are at Mysuru (Karnataka) and Salboni (West Bengal).
Coins are minted in four mints owned by SPMCIL. The mints are located at Mumbai, Hyderabad, Kolkata and NOIDA. The coins are issued for circulation only through the Reserve Bank in terms of Section 38 of the RBI Act.
Reserve Bank has authorized selected scheduled banks to establish currency chests for the distribution of banknotes and rupee coins. These are storehouses where banknotes and rupee coins are stocked on behalf of the Reserve Bank for distribution to bank branches in their area of operation. As on March 31, 2020, there were 3367 currency chests.
Small Coin Depots:
Some banks are authorised to establish Small Coin Depots to stock and distribute small coins i.e. coins of value below Rupee One to bank branches in their area of operation. As on March 31, 2020, there were 2782 small coin depots.
Distribution of Currency:
In India, notes and coins are distributed, in semi-retail model, the network of the RBI issue office, Currency Chests/ Small Coin Depots, bank branches and ATMs in the following manner:
In terms of Section 22 of the Act, Reserve Bank has the sole right to issue banknotes in India. Section 25 states that the design, form and material of bank notes shall be such as may be approved by the Central Government after consideration of the recommendations made by the Central Board of RBI.
Withdrawal of dirty/mutilated notes:
The Reserve Bank in terms of its clean note policy, provides good quality banknotes to the members of public. With this objective in view the banknotes received back from circulation are examined and those fit for circulation are reissued while the others (soiled and mutilated) are destroyed so as to maintain the quality of banknotes in circulation.
The mechanism in which dirty or soiled notes are retrieved and processed is given below:
(NSM: Note Sorting Machines, CC: Currency Chest)
Soiled and Mutilated Banknotes:
- “Soiled note” means a note which, has become dirty due to usage and also includes a two piece note pasted together wherein both the pieces presented belong to the same note, and form the entire note. These notes have no essential feature missing.
- “Mutilated banknote” is a banknote, of which a portion is missing or which is composed of more than two pieces. Essential features are missing which includes: Name of issuing authority, guarantee, promising clause, signature, Ashoka Pillar emblem, portrait of Mahatma Gandhi, watermark
- “Imperfect banknote” means any banknote, which is wholly or partially, obliterated, shrunk, washed, altered or indecipherable but does not include a mutilated banknote.
Soiled and mutilated banknotes can be exchanged for value. All banks are authorized to accept and exchange soiled/mutilated banknotes for full value. They shall extend the facility of exchange of soiled/mutilated notes to non-customers also.
Small Finance Banks and Payment Banks may exchange mutilated and imperfect/defective notes at their option.
In terms of Section 24 of the Reserve Bank of India Act, 1934, bank notes shall be of the denominational values of two rupees, five rupees, ten rupees, twenty rupees, fifty rupees, one hundred rupees, five hundred rupees, one thousand rupees, five thousand rupees and ten thousand rupees or of such other denominational values, not exceeding ten thousand rupees.
The highest denomination note ever printed by the Reserve Bank of India was the Rs. 10000 note in 1938 which was demonetized in January 1946. The Rs. 10000 was again introduced in 1954 which were demonetized in 1978.
In respect of coins, the role of RBI is limited to distribution of coins that are supplied by Government of India. The Government of India is responsible for the designing and minting of coins in various denominations as per the Coinage Act, 2011.
Coins in India are presently being issued in denominations of 50 paise, one rupee, two rupees, five rupees, ten rupees and twenty rupees. Coins up to 50 paise are called ‘small coins’ and coins of Rupee one and above are called ‘Rupee Coins’. Coins can be issued up to the denomination of Rs. 1000 under The Coinage Act, 2011.
RBI has not prescribed any limit for coin deposits by customers with banks. Banks are free to accept any amount of coins from their customers
The Government of India is responsible for the designing and minting of coins in various denominations.
The Government of India decides on the quantity of coins to be minted on the basis of indent received from the Reserve Bank on yearly basis.
Some Titbits about Indian currency:
- The paper currently being used for printing of banknotes in India is made by using 100% cotton.
- Mobile Aided Note Identifier (MANI) is a mobile application launched by the Reserve Bank for aiding visually impaired persons to identify the denomination of Indian Banknotes.
- All banknotes issued by RBI are backed by assets such as gold, Government Securities and Foreign Currency Assets, as defined in Section 33 of RBI Act, 1934.
- The first Governor Sir Osborne Smith did not sign any bank notes; first issue were signed by the second Governor, Sir James Taylor.
- The first note issued by Independent India was the Rupee One note issued by Government of India, through the bank in 1949.
- The one rupee note is issued by Government of India and bears the signature of the Finance Secretary.
- Government can mint coins upto Rs. 1000 denominations.
- The Indian rupee symbol (₹) was designed by D. Udaya Kumar.
We hope that the above PDF will be helpful in your preparation. Download other such PDFs here.
- Download Practicemock App for Updated Current Affairs, Free Topic-Wise Quizzes and Free Mini Mocks
- PracticeMock recommends AffairsCloud Current Affairs 2020 PDF. Buy Now and get Rs. 30 off by using the coupon code "PRACTICEMOCK"