Your Guide to Money MattersMoney
as a means of payment, consists of coins, paper money and withdrawable bank deposits.
Today, credit cards and electronic cash form an important component of the payment
system. For a common person though, money simply means currency and coins. This
is so because in India, the payment system, especially for retail transactions
still revolves around currency and coins. There is very little, however, that
the common person knows about currency and coins he handles on a daily basis.
Here is an attempt to answer some
of the Frequently Asked Questions on Indian Currency. Some
Basics What is the
Indian currency called?
The Indian currency is called the Indian Rupee (INR) and the coins are called
paise. One Rupee consists of 100 paise. What
are the present denominations of bank notes in India?
At present, notes in India are issued in the denomination of Rs.5, Rs.10,
Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000. These notes are called bank notes as
they are issued by the Reserve Bank of India (Reserve Bank). The printing of notes
in the denominations of Re.1 and Rs.2 has been discontinued as these denominations
have been coinised. However, such notes issued earlier are still in circulation.
The printing of notes in the denomination of Rs.5 had also been discontinued;
however, it has been decided to reintroduce these notes so as to meet the gap
between the demand and supply of coins in this denomination. What
are the present available denominations of coins in India?
Coins in India are available
in denominations of 10 paise, 20 paise, 25 paise, 50 paise, one rupee, two rupees
and five rupees. Coins up to 50 paise are called 'small coins' and coins of Rupee
one and above are called 'Rupee Coins'. Can
bank notes and coins be issued only in these denominations?
Not necessarily. The Reserve
Bank can also issue notes in the denominations of one thousand rupees, five thousand
rupees and ten thousand rupees, or any other denomination that the Central Government
may specify. There cannot, though, be notes in denominations higher than ten thousand
rupees in terms of the current provisions of the Reserve Bank of India Act, 1934.
Coins can be issued up to the denomination of Rs.1000. Currency
Management What is
the role of the Reserve Bank in currency management?
The Reserve Bank manages
currency in India. The Government, on the advice of the Reserve Bank, decides
on the various denominations. The Reserve Bank also co-ordinates with the Government
in the designing of bank notes, including the security features. The Reserve Bank
estimates the quantity of notes that are likely to be needed denomination-wise
and places the indent with the various presses through the Government of India.
The notes received from the presses are issued and a reserve stock maintained.
Notes received from banks and currency chests are examined. Notes fit for circulation
are reissued and the others (soiled and mutilated) are destroyed so as to maintain
the quality of notes in circulation. The Reserve Bank derives its role in currency
management on the basis of the Reserve Bank of India Act, 1934. What
is the role of Government of India?
The responsibility for
coinage vests with Government of India on the basis of the Coinage Act, 1906 as
amended from time to time. The designing and minting of coins in various denominations
is also attended to by the Government of India. Who
decides on the volume and value of bank notes to be printed and on what basis?
The
Reserve Bank decides upon the volume and value of bank notes to be printed. The
quantum of bank notes that needs to be printed broadly depends on the annual increase
in bank notes required for circulation purposes, replacement of soiled notes and
reserve requirements. Who
decides on the quantity of coins to be minted?
The Government of India
decides upon the quantity of coins to be minted. How
does the Reserve Bank estimate the demand for bank notes?
The Reserve Bank estimates
the demand for bank notes on the basis of the growth rate of the economy, the
replacement demand and reserve requirements by using statistical models. How
does the Reserve Bank reach the currency to people?
The Reserve Bank manages
the currency operations through its offices located at Ahmedabad, Bangalore, Bhopal,
Bhubaneshwar, Belapur(Navi Mumbai), Kolkata, Chandigarh, Chennai, Guwahati, Hyderabad,
Jaipur, Kanpur, Lucknow, Mumbai (Fort), Nagpur, New Delhi, Patna and Thiruvananthapuram.
These offices receive fresh notes from the note presses. Similarly, the Reserve
Bank offices located at Kolkata, Hyderabad, Mumbai and New Delhi initially receive
the coins from the mints. These offices then send them to the other offices of
the Reserve Bank. The notes and rupee coins are stocked at the currency chests
and small coins at the small coin depots. The bank branches receive the bank notes
and coins from the currency chests and small coin depots for further distribution
among the public. What
is a currency chest?
To
facilitate the distribution of notes and rupee coins, the Reserve Bank has authorised
selected branches of banks to establish currency chests. These are actually storehouses
where bank notes and rupee coins are stocked on behalf of the Reserve Bank. At
present, there are over 4422 currency chests. The currency chest branches are
expected to distribute notes and rupee coins to other bank branches in their area
of operation. What is
a small coin depot?
Some
bank branches are also authorised to establish small coin depots to stock small
coins. There are 3784 small coin depots spread throughout the country. The small
coin depots also distribute small coins to other bank branches in their area of
operation. What happens
when the notes and coins return from circulation?
Notes and coins returned
from circulation are deposited at the offices of the Reserve Bank. The Reserve
Bank then separates the notes that are fit for reissue and those which are not
fit for reissue. The notes which are fit for reissue are sent back in circulation
and those which are unfit for reissue are destroyed after processingshredded.
The same is the case with coins. The coins withdrawn are sent to the Mints for
melting. From where can
the general public obtain bank notes and coins?
Bank notes and coins can
be obtained at any of the offices of the Reserve Bank and at all branches of banks
maintaining currency chests and small coin depots. Current
Issues Why are the
coins and bank notes in short supply?
This is not entirely correct.
It is true that till recently the demand for currency was more than their supply.
The primary reason for this is that the Indian society is still predominantly
cash-driven. However, at present there are no supply constraints so far as bank
notes are concerned. As regards coins, Government of India are taking various
steps, including importing rupee coins. The impression of coins being in short
supply is also enhanced probably due to people’s preference for notes. Is
there a way to reduce dependence on cash?
Yes, once instruments such
as, cheques, credit and debit cards, electronic funds transfer gain popularity,
the demand for currency is expected to go down. Meanwhile,
are some steps being taken to increase the supply of bank notes and coins?
Yes, several steps have been
taken to augment the supply of bank notes and coins. Some of these are:
- The existing note printing
presses and the mints owned by the Government are being modernised.
- Two
new currency printing presses with the state-of-the-art technology have been set
up under the aegis of the Bharatiya Reserve Bank Note Mudran Ltd., a wholly owned
subsidiary of the Reserve Bank.
- To
bridge the demand-supply gap, the Government had, as a one-time measure, even
imported bank notes.
- The
production capacity of the four India Government Mints are being augmented.
- Government
of India has also been importing rupee coins to supplement the supply of coins
from the four mints. Till date 2 billion rupee coins have been imported.
Why
are Re1, Rs.2 and Rs.5 notes not being printed?
Volume-wise, the share
of such small denomination notes in the total notes in circulation was as high
as 57 per cent but constituted only 7 per cent in terms of value. The average
life of these notes was found to be around a year. The cost of printing and servicing
these notes was, thus, not commensurate with their life. Printing of these notes
was, therefore, discontinued. These denominations were, therefore, coinised. However,
it has been decided that notes in the denomination of Rs.5 be re-introduced so
as to meet the gap between the demand and supply of coins in this denomination. Soiled
and Mutilated Notes What
are soiled and mutilated notes?
Soiled notes are notes, which have become dirty and limp due to excessive
use. Mutilated notes are notes, which are torn, disfigured, burnt, washed, eaten
by white ants, etc. A double numbered note cut into two pieces but on which both
the numbers are intact is now being treated as soiled note. Can
such notes be exchanged for value?
Yes. Soiled notes can be tendered at all bank branches for and exchange obtained. How
much value would one get in exchange of soiled or mutilated notes?
Full value is payable against
soiled notes. Payment of exchange value of mutilated notes is governed by the
Reserve Bank of India (Note Refund) Rules, 1975. These Rules have been framed
under Section 28 of the Reserve Bank of India Act, 1934. The public can get value
for these notes as laid down in the Rules, after adjudication. Currently, provisions
exist for paying either full, half or no value as far as notes in the denomination
for Rs.10 and above are concerned; as regards Re.1, Rs.2 & Rs.5, a tenderer
can get either full or no value depending upon the condition of the note. What
types of notes are not eligible for payment under the Note Refund Rules?
The following notes are
not payable under the Note Refund Rules. A
note which is - less
than half the area of the full note
- devoid
of the major portion of the number, i.e., the prefix and three digits or four
digits of the number in notes up to and inclusive of Rs.5; in respect of notes
of Rs.10 and above, where this inadequacy is present at both the numbering panels.
- cancelled
by any office of the Reserve Bank or against which the value has already been
paid
- found to be forged
- deliberately
cut, mutilated or tampered
- carrying
extrinsic words or visible representation intended to convey or capable of conveying
any message of a political character.
What
if a note is found to be non-payable?
Non-payable notes are retained by the receiving banks and sent to the Reserve
Bank where they are destroyed. Where
are soiled/mutilated notes accepted?
All banks are authorised
to accept soiled notes across their counters and pay the exchange value. They
are expected to offer this service even to non-customers. All public sector bank
branches and currency chest branches of private sector banks are authorised to
adjudicate and pay value in respect of mutilated notes, in terms of the Reserve
Bank of India (Note Refund) Rules, 1975. The RBI has also authorised all commercial
bank branches to treat certain notes in ‘two pieces’ as soiled notes and pay exchange
value. Features of Contemporary
Bank Notes What are
the general features of bank notes currently in circulation?
Rs.10, Rs.20, Rs.50 and Rs.100 notes issued earlier and which are still in
circulation contain the Ashoka Pillar watermark and Ashoka Pillar effigy. The
Rs.500 notes issued earlier i.e. since 1987 bear the Ashoka Pillar watermark and
the Mahatma Gandhi portrait. The Reserve Bank is now issuing bank notes in Mahatma
Gandhi series. This means that the notes contain Mahatma Gandhi watermark as well
as Mahatma Gandhi's portrait. The Rs.5 notes re-introduced in August 2001 also
bear the Ashoka Pillar watermark and Ashoka Pillar effigy. All these notes issued
by the Bank are legal tender. Why
was the change brought about?
The central banks the world over bring in some change in the design of their
bank notes. This is primarily to make counterfeiting difficult. India also follows
the same policy. Are there
any special features introduced in the notes of Mahatma Gandhi series?
The new Mahatma Gandhi series
of notes contain several special features vis-à-vis the notes issued earlier.
These are: i) Security
thread: Rs.10, Rs.20 and Rs.50 notes contain a readable but fully embedded
security windowed security thread. Rs.100, Rs.500 and Rs.1000 notes contain a
readable windowed security thread. This thread is partially exposed and partially
embedded. When held against light, this thread can be seen as one continuous line.
Other than on Rs.1000 notes, this thread contains the words 'Bharat' in the devnagri
script and 'RBI' appearing alternately. The security thread of the Rs.1000 note
contains the inscription 'Bharat' in the devnagri script, '1000' and 'RBI'. Notes
issued earlier have a plain, non-readable fully embedded security thread. ii)
Latent Image: A vertical band behind on the right side of the Mahatma Gandhi’s
portrait, which contains a latent image, showing the denominational value 20,
50, 100, 500 or 1000 as the case may be. The value can be seen only when the note
is held on the palm and light allowed to fall on it at 45° ; otherwise this feature
appears only as a vertical band. iii)
Microletterings: This feature appears between the vertical band and Mahatma
Gandhi portrait. It contains the word ‘RBI’ in Rs.10. Notes of Rs.20 and above
also contain the denominational value of the notes. This feature can be seen better
under a magnifying glass. iv)
Identification mark: A special intaglio feature has been introduced on the
left of the watermark window on all notes except Rs.10/- note. This feature is
in different shapes for various denominations (Rs.20-Vertical Rectangle, Rs.50-Square,
Rs.100-Triangle, Rs.500-Circle, Rs.1000-Diamond) and helps the visually impaired
to identify the denomination. v)
Intaglio Printing: The portrait of Mahatma Gandhi, Reserve Bank seal, guarantee
and promise clause, Ashoka Pillar Emblem on the left, RBI Governor's signature
are printed in intaglio i.e. in raised prints in Rs.20, Rs.50, Rs.100, Rs.500
and Rs.1000 notes. vi)
Fluorescence: The number panels of the notes are printed in fluorescent ink.
The notes also have optical fibres. Both can be seen when the notes are exposed
to ultra-violet lamp. vii)
Optically Variable Ink: The numeral 500 & 1000 on the Rs.500 [revised
colour scheme of mild yellow, mauve and brown] and Rs.1000 notes are printed in
Optically Variable Ink viz., a colour-shifting ink. The colour of these numerals
appear green when the notes are held flat but would change to blue when the notes
are held at an angle. Forgeries How
does one differentiate between a genuine note and a forged note?
The notes on which the above features are not available can be suspected as
forged notes and examined minutely. What
are the legal provisions relating to printing and circulation of forged notes?
Printing and circulation of forged
notes are offences under Sections 489A to 489E of the Indian Penal Code and are
punishable in the courts of law by fine or imprisonment or both, depending on
the offence. Remember:
An aware public is the best safeguard against forgeries This
is an electronic document. Kindly refer to the printed brochure for the definitive
version. Top
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