Currency System In India

Currency System In India


Role of Government of India in Currency System:
In terms of Section 25 of RBI Act, 1934 the design of banknotes is required to be approved by the Central Government on the recommendations of the Central Board of the Reserve Bank of India. The responsibility for coinage vests with the Government of India on the basis of the Coinage Act, 1906 as amended from time to time. The Government of India also attends to the designing and minting of coins in various denominations.

RBI Limitations: The Indian Government
Although the RBI has the power to print Indian currency, the government still has the final say on a majority of the Reserve Bank's actions. For example, the government decides which denominations are printed and the design of the banknotes, including the security features. The Reserve Bank has the right to print currency up to 10,000 rupee notes. However, if the Reserve Bank wants to print anything higher, the government must amend the Reserve Bank of India Act. In addition, when the Reserve Bank estimates the demand for banknotes each year, it must file a written request that government officials must sign off on before printing. When making these final decisions, government officials rely heavily on advice from the Reserve Bank senior staff.

It's worth noting that in a surprise move on November 8, 2016, the Indian government announced it would be withdrawing 500 and 1,000 rupee notes from circulation to help curb counterfeiting and corruption. Following the announcement, holders of these notes were able to exchange their cash at banks; however, as of December 2016, banks no longer exchange these notes. As a replacement, new 500 and 2,000 denomination rupee notes have been issued. The following denominations are now in circulation: 5, 10, 20, 50,100, 500, and 2000 rupee notes, along with the following coins: the 50 paise, 1, 2, 5, and 10 rupee. (For related reading, see: India Discontinues 500 and 1000 Rupee Currency Notes.)

What About Coins?
While the Reserve Bank of India prints currency, the government of India directly handles the minting of coins. Coins are minted at the four mints: Alipore in South Kolkata, Saifabad in Hyderabad, Cherlapally in Hyderabad, and Noida in Uttar Pradesh. Although the government handles minting coins, the Reserve Bank issues them for circulation.

What is a small coin depot?
Some bank branches are also authorized to establish Small Coin Depots to stock small coins. The Small Coin Depots also distribute small coins to other bank branches in their area of operation.

How much currency to be produced?
The Reserve Bank decides the volume and value of banknotes except Re. 1 note to be printed each year. The quantum of banknotes that needs to be printed, broadly depends on the requirement for meeting the demand for banknotes due to inflation, GDP growth, replacement of soiled banknotes and reserve stock requirements.

Who decides the coins issue?
The Government of India decides the quantity of coins to be minted on the basis of indents( official order) received from the Reserve Bank.  

How does the Reserve Bank estimate the demand for banknotes?
The Reserve Bank estimates the demand for banknotes on the basis of the growth rate of the economy, the replacement demand and reserve stock requirements by using statistical models/techniques. 

What is a currency chest?
To facilitate the distribution of banknotes and rupee coins, the Reserve Bank has authorized select branches of scheduled banks to establish Currency Chests. These are actually storehouses where banknotes and rupee coins are stocked on behalf of the Reserve Bank.

Qs & As
Q. Who is responsible for printing notes and minting coins?
Ans: Security Printing and Minting Corporation of India Limited (SPMCIL), owned by the Govt. of India

Q. Where are the printing presses located?
Ans: Nasik in Maharashtra, Dewas in Madhya Pradesh, Mysore in Karnataka, and Salboni in West Bengal

Q. How many mints for coin production are in force?
Ans: Four mints at Mumbai, Noida, Kolkata, and Hyderabad

Q. How do they facilitate the distribution of currency?
Ans: Through select branches of banks called Currency Chests

Q. Who have they established with?
Ans: 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

Demonetization Changes
On 8th November 2016, the Government of India demonetized old 500 and 1000 rupee notes, with the aim of ending corruption.
After that, 200 and 50 rupee notes were released.
And soon, RBI will launch the new 10 rupee note.

Printing Expense
1,695.7 crore pieces of Rs. 500 denomination notes cost Rs. 4,968.84 crore.
365.4 crore pieces of Rs. 2000 denomination notes cost Rs. 1,293.6 crore.
178 crore pieces of Rs. 200 denomination notes cost Rs. 522.83 crore.

New 10 Rupee Note
New color- chocolate brown.
Height – 63 mm, Width – 109 mm
Motif of Konark Sun Temple on the back

New 50, 200, 500, and 200 Rupee Note
The new 50 rupee note is fluorescent blue in color. It also has a motif of Hampi with Chariot plus the Swachh Bharat logo and slogan.
And the new 200 rupee note is yellow in color. It features the motif of the Sanchi Stupa in Madhya Pradesh. Furthermore, it also has a raised identification mark H with micro-text Rs 200, four angular bleed lines with two circles in between the lines both on the right and left sides. This has been designed to aid the visually impaired people to help detect fake notes.
2000 rupee note was introduced in 2016. And it has a magenta color. On the back side, there is a motif of Mangalyaan. Furthermore, it also has a rectangle with Rs. 2000 in raised print on right as well as seven angular bleed lines in raised print to aid the visually impaired.
There is a motif of the Red Fort on the new stone-grey 500 rupee note. It also has a circle with Rs. 500 in raised print on the right as well as five angular bleed lines in raised print to aid the visually impaired.