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Saturday, 5 July 2008

History of Indian currency

(This is Rs.10 currency note printed by Reserve bank India between 1949-1957 when Sir Benegal Rama Rau was the Governor for the RBI)

History of Indian Rupee

India has been one of the earliest issuers of coins in the world (circa 6th Century BC), along with the Chinese wen and Lydian staters. The origin of the word "rupee" is found in the word rūp or rūpā, which means "silver" in many Indo-Aryan languages such as Hindi. The Sanskrit word rupyakam (Devanagari:रूप्यकम्) means coin of silver.

The derivative word Rūpaya was used to denote the coin introduced by Sher Shah Suri during his reign from 1540 to 1545 CE. The original Rūpaya was a silver coin weighing 175 grains troy (about 11.34 grams) [1]. The coin has been used since then, even during the times of British India. Formerly the rupee was divided into 16 annas, 64 paise, or 192 pies. In Arabia and East Africa the British India rupee was current at various times, including the paisa and was used as far south as Natal. In Mozambique the British India rupees were overstamped, and in Kenya the British East Africa company minted the rupee and its fractions as well as pice. It was maintained as the florin, using the same standard, until 1920. In Somalia the Italian colonial authority minted 'Rupia' to the exact same standard, and called the paisa 'besa'. Early 19th century E.I.C. rupees were used in Australia for a limited period. Decimalisation occurred in Ceylon (Sri Lanka) in 1872, India in 1957 and in Pakistan in 1961.

Among the earliest issues of paper rupees were those by the Bank of Hindustan (1770-1832), the General Bank of Bengal and Bihar (1773-75, established by Warren Hastings), the Bengal Bank (1784-91), amongst others.

Historically, the rupee was a silver based currency. This had severe consequences in the nineteenth century, when the strongest economies in the world were on the gold standard. The discovery of vast quantities of silver in the U.S. and various European colonies resulted in a decline in the relative value of silver to gold. Suddenly the standard currency of India could not buy as much from the outside world. This event was known as "the fall of the Rupee."
During British rule, and the first decade of independence, the rupee was subdivided into 16 Annas. Each Anna was subdivided into either 4 pices, or 12 pies.

In 1957, decimalisation occurred and the rupee was now divided into 100 Naye Paise (Hindi for new paisas). After a few years, the initial "Naye" was dropped. However many still refer to 25, 50 & 75 paise as 4, 8 and 12 annas respectively, not unlike the now largely defunct usage of "bit" in American English for 1/8 dollar.

Rupee banknotes

Early paper issues

Notes issued by the Bank of Bengal can be categorised in the following three series.
Unifaced series: The early notes of the Bank of Bengal were printed only on one side and were issued as one gold mohur and in denominations of Rs. 100, Rs. 250, Rs. 500, etc.

Commerce series: Later notes had a vignette representing an allegorical female figure personifying 'commerce'. The notes were printed on both sides. On the obverse the name of the bank and the denominations were printed in three scripts, viz., Urdu, Bengali and Devanagari. On the reverse of such notes was printed a cartouche with ornamentation carrying the name of the Bank.

Brittania series: By late 1800s, the motif 'commerce' was replaced by 'Britannia'. The new banknotes had more features to prevent forgery.

British India issues

The Paper Currency Act of 1861 gave the Government the monopoly of note issue throughout the vast expanse of India, which was a considerable task. Eventually, the management of paper currency was entrusted to the Mint Masters, the Accountant Generals and the Controller of Currency.

Victoria portrait series: The first set of British India notes were the 'Victoria Portrait' series issued in denominations of 10, 20, 50, 100 and 1000. These were unifaced, carried two language panels. The security features incorporated the watermark, the printed signature and the registration of the notes.

Underprint series: The unifaced Underprint series was introduced in 1867 as the Victoria Portrait series was withdrawn in the wake of a spate of forgeries.

George V series: A series carrying the portrait of George V were introduced in 1923, and was continued as an integral feature of all paper money issues of British India. These notes were issued in denominations of Rs 5, 10, 50, 100, 500, 1000, 10,000.

Reserve Bank issues during British India

The Reserve Bank of India was formally inaugurated on Monday, April 1, 1935 with its Central Office at Calcutta. Section 22 of the RBI Act, 1934, empowered it to continue issuing Government of India notes until its own notes were ready for issue. The bank issued the first five rupee note bearing the portrait of George VI in 1938. This was followed by Rs. 10 in February, Rs 100 in March and Rs 1,000 and Rs 10,000 in June 1938. The first Reserve Bank issues were signed by the second Governor, Sir James Taylor. In August 1940, the one-rupee note was reintroduced as a wartime measure, as a Government note with the status of a rupee coin. During the war, the Japanese produced high-quality forgeries of the Indian currency. This necessitated a change in the watermark. The profile portrait of George VI was changed to his full frontal portrait. The security thread was introduced for the first time in India. The George VI series continued till 1947 and thereafter as a frozen series till 1950 when post-independence notes were issued.

Republic of India Issues

After Independence of India, the government brought out the new design Re. 1 note in 1949. Initially it was felt that the King's portrait be replaced by a portrait of Mahatma Gandhi. Finally however, the Lion Capital of Asoka was chosen. The new design of notes were largely along earlier lines. In 1953, Hindi was displayed prominently on the new notes. The economic crisis in late 1960s led to a reduction in the size of notes in 1967. High denomination notes, like Rs. 10,000 notes were demonetised in 1978.

The "Mahatma Gandhi Series" was introduced in 1996. Prominent new features included a changed watermark, windowed security thread, latent image and intaglio features for the visually handicapped.

Other issues

Main articles: Pakistani rupee, French Indian rupee, Portuguese Indian Rupia, and Gulf rupee
Pakistani issues: At partition, the birth of Pakistan resulted in a new currency which was used to fund the new nation. Today, the notes feature the father of the nation, Jinnah.

Jammu and Kashmir issues: Maharaja Rambir Singh introduced paper money on watermarked paper in 1877. The notes were not very popular and were in circulation for a very short period. The notes carried the 'Sun' motif of the Dogra family.

Hyderabad issues: The Government of Hyderabad had made several efforts to organise private bankers to set up a banking company which could issued paper money. The British, however resisted the attempts of Indian princely states to issue paper currency. The acute shortage of silver during the First World War and the contributions of Hyderabad State to the British war effort led them to accept, in 1918, paper currency in denominations of Rs.10/- and Rs.100/- issued under the Hyderabad Currency Act. The currency was designated the Osmania Sicca (OS). Rupee One and Rupees Five notes were issued subsequently in 1919 and Rupees One Thousand notes were issued in 1926. After the setting up of the India Currency Notes Press at Nasik, Hyderabad notes came to be printed there.

Burma issues: Burma separated from India in 1938; however, the Reserve Bank of India acted as Banker to the Government of Burma and was responsible for note issue in terms of the Burma Monetary Arrangements Order, 1937. In May 1938 the Bank issued Burma notes which were not legal tender in India.

Indo-French issues: The French Indian rupee (FIR) was introduced by France's Bank of Indochina in French colonies of India.

Indo-Portuguese issues : The Portuguese Indian Rupia was the currency of Portuguese India until 1959. It was divisible into 16 Tangas or 960 Reis. In 1959, the currency was changed to the Portuguese Indian Escudo, at the rate of 1 Rupia for 6 Escudos.

Persian Gulf issues: For many years in the early and mid 20th century, the Indian rupee was the official currency in several areas that were controlled by the British and governed from India; areas such as East Africa, Southern Arabia and the Persian Gulf. The rupees used in the Persian Gulf had been bought by the Gulf states from the Reserve Bank of India, who held the sterling reserves by which the rupees had originally been purchased. However, Indian rupees were being smuggled from India to the states of the Persian Gulf in exchange for gold. It was estimated in 1959 that the total amount of gold in private hands in India was about $US1.75 to 2 billion--roughly two thirds of the value of paper money in circulation. While it was legal to own and to trade in gold within India, it was illegal to import or export gold. The Gulf Rupee, also known as the Persian Gulf Rupee (XPGR), was introduced by the Indian government as a replacement for the Indian Rupee for circulation exclusively outside the country with the Reserve Bank of India Amendment Act, 1 May 1959. After India devalued the rupee on 6 June 1966, those countries still using it - Oman, Qatar and what is now the United Arab Emirates (known as the Trucial States until 1971) - replaced the Gulf Rupee with their own currencies. Kuwait and Bahrain had already done so in 1961 and 1965 respectively.

Emergency issues, Princely states: During the 1940s, when mints were occupied for use in the war, an acute scarcity of small coins was felt throughout India. Princely states in Western India like Balvan, Bikaner, Bundi, Gondal, Indergadh, Junagadh, Jasdan, Kutch Mengni, Muli, Morvi, Mangrol, Nawanagar, Nawalgarh Palitana, Rajkot, Sailana, Sayla, Vithalgadh, issued "Cash Coupons" to meet the shortage.