Paper Money, as we know it today, was introduced in India in the late
Eighteenth Century. This was a period of intense political turmoil and
uncertainty in the wake of the collapse of the Mughal Empire and the advent of
the colonial powers. The changed power structure, the upheavals, wars, and
colonial inroads led to the eclipse of indigenous bankers, as large finance in
India moved from their hands to Agency Houses who enjoyed state patronage.
Many agency houses established banks.
Among the early issuers, the General Bank of Bengal and Bahar (1773-75) was
a state sponsored institution set up in participation with local expertise.
Its notes enjoyed government patronage. Though successful and profitable, the
bank was officially wound up and was short lived. The Bank of Hindostan
(1770-1832) was set up by the agency house of Alexander and Company was
particularly successful. It survived three panic runs on it. The Bank of
Hindostan finally went under when its parent firm M/s Alexander and Co. failed
in the commercial crisis of 1832. Official patronage and the acceptance of
notes in the payment of revenue was a very important factor in determining the
circulation of bank notes. Wide use of bank notes, however, came with the note
issues of the semi-government Presidency Banks, notably the Bank of Bengal
which was established in 1806 as the Bank of Calcutta with a capital of 50
lakh sicca rupees. These banks were established by Government Charters and had
an intimate relationship with the Government. The charter granted to these
banks accorded them the privilege of issuing notes for circulation within
their circles.
Notes issued by the Bank of Bengal can broadly be categorised in 3 broad
series viz: the 'Unifaced' Series, the 'Commerce' Series and the 'Britannia'
Series. The early notes of the Bank of Bengal were unifaced and were issued as
one gold mohur (sixteen sicca rupees in Calcutta) and in denominations deemed
convenient in the early 19th Century, viz., Rs. 100, Rs. 250, Rs.
500, etc.
The Bank of Bengal notes later introduced a vignette represented an
allegorical female figure personifying 'Commerce' sitting by the quay. 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 Nagri. On
the reverse of such notes was printed a cartouche with ornamentation carrying
the name of the Bank. Around the mid nineteenth century, the motif 'Commerce'
was replaced by 'Britannia'. The note had intricate patterns and multiple
colours to deter forgeries.
The second Presidency Bank was established in 1840 in Bombay, which had
developed as major commercial centre. The Bank had a checkered history. The
crisis resulting from the end of the speculative cotton boom led to the
liquidation of Bank of Bombay in 1868. It was however reconstituted in the
same year. Notes issued by the Bank of Bombay carried the vignettes of the
Town Hall and others the statues of Mountstuart Elphinstone and John Malcolm.
The Bank of Madras established in 1843 was the third Presidency Bank. It
had the smallest issue of bank notes amongst Presidency Banks. The notes of
the Bank of Madras bore the vignette of Sir Thomas Munroe, Governor of Madras
(1817-1827).
The other private banks which issued bank notes were the Orient Bank
Corporation established in Bombay as the Bank of Western India in 1842. Its
notes featured the Bombay Town Hall as vignette. The Commercial Bank of India
established in 1845 in Bombay (also an Exchange Bank) issued exotic notes with
an interblend of Western and Eastern Motifs. The bank failed in the crash of
1866. The paper currency Act of 1861 divested these banks of the right to note
issue; the Presidency Banks were, however, given the free use of Government
balances and were initially given the right to manage the note issues of
Government of India.
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