All you need to know about INDIAN CURRENCY SYSTEM(BANKING AWARENESS)
⤵
》Current circulating banknotes
As of 10 November 2016, the current circulating banknotes are in denominations of ₹5, ₹10, ₹20, ₹50 and ₹100 are of the Mahatma Gandhi Series, while the denominations of ₹500 and ₹2000 are of the new Mahatma Gandhi New Series, and the denomination of ₹1 is of the Lion Capital Series.
■Currency Management■
》What is the role of the Reserve Bank of India in currency management?
The Reserve Bank derives its role in currency management from the Reserve Bank of India Act, 1934.The Reserve Bank manages currency in India. The Government, on the advice of the Reserve Bank, decides on various denominations of banknotes to be issued. The Reserve Bank also co-ordinates with the Government in the designing of banknotes, including the security features.
The Reserve Bank estimates the quantity of banknotes that are likely to be needed denomination-wise and accordingly, places indent with the various printing presses.
The aim of the Reserve Bank is to provide good quality notes to members of public. Towards this aim, the banknotes received back from circulation are examined and those fit for circulation are reissued and the others (soiled and mutilated) are destroyed so as to maintain the quality of banknotes in circulation.
》What is the role of Government of India?
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, 2011 as amended from time to time. The Government of India is also responsible for the designing and minting of coins in various denominations.
》Who decides on the figure to be printed on a new note?
The Government of India in consultation with the Reserve Bank of India decided on the design of banknotes.
》What happens to the old design notes when a new design is introduced?
Both old and new design notes usually circulate together for a while. The old design notes are then gradually withdrawn from circulation when they become unfit to be re-issued.
》Are old notes issued by the Reserve Bank of India worthless?
No. The Reserve Bank of India does not withdraw the legal tender character of notes issued in the past. All RBI notes retain their face value till any specific communication from RBI to the contrary. These notes can be exchanged at any bank branch. However, the above does not apply to the higher denomination banknotes of Rs 500, Rs. 1000, Rs. 5000 and `10000 that were demonetized in 1978 & 2016.
》What was the highest denomination note ever printed?
The highest denomination note ever printed by the Reserve Bank of India was the Rs. 10000 note in 1938 and again in 1954. These notes were demonetized in 1946 and again in 1978.
》What is the role of RBI in issue of coins?
The role of RBI is limited to distribution of coins that are supplied by Government of India. The responsibility for coinage vests with the Government of India on the basis of the Coinage Act, 2011, as amended from time to time.
》Who is responsible for changing the design of coins from time to time?
The Government of India is responsible for the designing and minting of coins in various denominations.
》What is currency paper made of?
Currency paper is composed of cotton and cotton rag.
》 Who decides on the volume and value of banknotes to be printed and on what basis?
The Reserve Bank based on the demand requirement indicates the volume and value of banknotes to be printed each year to the Government of India which get finalized after mutual consultation. The quantum of banknotes to be printed, broadly depends on the requirement for meeting the demand for banknotes, GDP growth, replacement of soiled banknotes, reserve stock requirements, etc.
》Who decides on the quantity of coins to be minted?
The Government of India decides on the quantity of coins to be minted on the basis of indents 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, inflation rate, the replacement demand and reserve stock requirements by using statistical models/techniques.
》Where are notes and coins produced?
Notes are printed at four printing presses located at Nashik, Dewas, Mysore and Salboni. Coins are minted at the four mints at Mumbai, Noida, Kolkata and Hyderabad.
》How does the Reserve Bank reach the currency to people?
The Reserve Bank presently manages the currency operations through its 19 Issue offices located at Ahmedabad, Bangalore, Belapur, Bhopal, Bhubaneswar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, New Delhi, Patna, Thiruvananthapuram, a currency chest at Kochi and a wide net work of currency chests. These offices receive fresh banknotes from the banknote printing presses. The Issue Offices of RBI send fresh banknote remittances to the designated branches of commercial banks.
The Reserve Bank offices located at Hyderabad, Kolkata, Mumbai and New Delhi (Mint linked Offices) initially receive the coins from the mints. These offices then send them to the other offices of the Reserve Bank who in turn send the same to currency chests and small coin depots. The banknotes and rupee coins are stocked at the currency chests and small coins at the small coin depots. The bank branches receive the banknotes 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 banknotes and rupee coins, the Reserve Bank has authorised 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. As on December 31, 2013, there were 4209 currency chests. The currency chest branches are expected to distribute banknotes and rupee coins to other bank branches in their area of operation.
》What is a small coin depot?
Some bank branches are authorised to establish Small Coin Depots to stock small coins i.e. coins below Rupee one. The Small Coin Depots also distribute small coins to other bank branches in their area of operation. As on December 31, 2013, there were 3966 small coin depots.
》What happens when the banknotes and coins return from circulation?
Banknotes returned from circulation are deposited at the Issue offices of the Reserve Bank. The Reserve Bank subjects these to processing, authenticates banknotes for their genuineness, segregates them into notes fit for reissue and those which are unfit, for cancellation.
The banknotes which are fit for reissue are sent back in circulation and those which are unfit for reissue are destroyed by way of shredding after completion of examination process. Coins do not come back from circulation, except those which are withdrawn.
From where can the general public obtain banknotes and coins?
Presently, banknotes and coins can be obtained in exchange at RBI offices and all branches of banks. This function is being delegated by RBI to commercial banks.
● I.Coins
Coins in India are presently being issued in denominations of 50 paisa, one rupee, two rupees, five rupees and ten rupees. Coins up to 50 paisa are called ‘small coins’ and coins of Rupee one and above are called ‘Rupee Coins’.
Coins in the denomination of 1 paisa, 2 paisa, 3 paisa, 5 paisa, 10 paisa, 20 paisa and 25 paisa have been withdrawn from circulation with effect from June 30, 2011 and are, therefore, no more legal tender.
■II.Currency:
Banknotes in India are currently being issued in the denomination of Rs. 10, Rs. 20, `50, Rs. 100 Rs. 500, and 2000. These notes are called banknotes as they are issued by the Reserve Bank of India (Reserve Bank).
The printing of notes in the denominations of Rs. 1, Rs. 2 and Rs. 5 has been discontinued as these denominations have been coinised.
However, such banknotes issued earlier can still be found in circulatio
n and these banknotes continue to be legal tender.
》What is the Indian currency called?
The Indian currency is called the Indian Rupee (INR) and the coins are called paisa. One Rupee consists of 100 paisa. The symbol of the Indian Rupee is . The design resembles both the Devanagari letter “” (ra) and the Latin capital letter “R”, with a double horizontal line at the top.
》Can banknotes and coins be issued only in these denominations?
Not necessarily. The Reserve Bank can also issue banknotes in the denominations of five thousand rupees and ten thousand rupees, or any other denomination that the Central Government may specify. However, there cannot be banknotes 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 in terms of The Coinage Act, 2011.
》Demonetization of higher denomination banknotes.
Rs. 1000 and Rs. 10000 banknotes, which were then in circulation were demonetized in January 1946, primarily to curb unaccounted money.
The higher denomination banknotes in Rs. 1000, Rs. 5000 and Rs. 10000 were reintroduced in the year 1954, and these banknotes (Rs. 1000, Rs. 5000 and Rs. 10000) were again demonetized in January 1978.The Rs. 1,000 note made a comeback in November 2000. Rs. 500 note came into circulation in October 1987. The move was then justified as attempt to contain the volume of banknotes in circulation due to inflation. However, this is the first time that Rs. 2,000 currency note is being introduced.
》What is legal tender?
The coins issued under the authority of Section 6 of The Coinage Act, 2011, shall be legal tender in payment or on account i.e. provided that a coin has not been defaced and has not lost weight so as to be less than such weight as may be prescribed in its case: – (a) coin of any denomination not lower than one rupee shall be legal tender for any sum, (b) half rupee coin shall be legal tender for any sum not exceeding ten rupees,
Every banknote issued by Reserve Bank of India (Rs. 2, Rs. 5, Rs. 10, Rs. 20, Rs. 50, Rs. 100, Rs. 500 and Rs. 1000) shall be legal tender at any place in India in payment or on account for the amount expressed therein, and shall be guaranteed by the Central Government, subject to provisions of sub-section (2) Section 26 of RBI Act, 1934.
》What is the meaning of “I promise to pay” clause?
As per Section 26 of Reserve Bank of India Act, 1934, the Bank is liable to pay the value of banknote. This is payable on demand by RBI, being the issuer. The Bank’s obligation to pay the value of banknote does not arise out of a contract but out of statutory provisions.
The promissory clause printed on the banknotes i.e., “I promise to pay the bearer the sum of Rupees …is a statement which means that the banknote is a legal tender for the specified amount. The obligation on the part of the Bank is to exchange a banknote with bank notes of lower value or other coins which are legal tender under the Indian Coinage Act, 2011, of an equivalent amount.
》Why is One Rupee liability of the Government of India?
The One Rupee notes issued under the Currency Ordinance, 1940 are also legal tender and included in the expression Rupee coin for all the purposes of the Reserve Bank of India Act, 1934. Since the rupee coins issued by Government constitute the liabilities of the Government, one rupee is also liability of the Government of India.
⤵
》Current circulating banknotes
As of 10 November 2016, the current circulating banknotes are in denominations of ₹5, ₹10, ₹20, ₹50 and ₹100 are of the Mahatma Gandhi Series, while the denominations of ₹500 and ₹2000 are of the new Mahatma Gandhi New Series, and the denomination of ₹1 is of the Lion Capital Series.
■Currency Management■
》What is the role of the Reserve Bank of India in currency management?
The Reserve Bank derives its role in currency management from the Reserve Bank of India Act, 1934.The Reserve Bank manages currency in India. The Government, on the advice of the Reserve Bank, decides on various denominations of banknotes to be issued. The Reserve Bank also co-ordinates with the Government in the designing of banknotes, including the security features.
The Reserve Bank estimates the quantity of banknotes that are likely to be needed denomination-wise and accordingly, places indent with the various printing presses.
The aim of the Reserve Bank is to provide good quality notes to members of public. Towards this aim, the banknotes received back from circulation are examined and those fit for circulation are reissued and the others (soiled and mutilated) are destroyed so as to maintain the quality of banknotes in circulation.
》What is the role of Government of India?
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, 2011 as amended from time to time. The Government of India is also responsible for the designing and minting of coins in various denominations.
》Who decides on the figure to be printed on a new note?
The Government of India in consultation with the Reserve Bank of India decided on the design of banknotes.
》What happens to the old design notes when a new design is introduced?
Both old and new design notes usually circulate together for a while. The old design notes are then gradually withdrawn from circulation when they become unfit to be re-issued.
》Are old notes issued by the Reserve Bank of India worthless?
No. The Reserve Bank of India does not withdraw the legal tender character of notes issued in the past. All RBI notes retain their face value till any specific communication from RBI to the contrary. These notes can be exchanged at any bank branch. However, the above does not apply to the higher denomination banknotes of Rs 500, Rs. 1000, Rs. 5000 and `10000 that were demonetized in 1978 & 2016.
》What was the highest denomination note ever printed?
The highest denomination note ever printed by the Reserve Bank of India was the Rs. 10000 note in 1938 and again in 1954. These notes were demonetized in 1946 and again in 1978.
》What is the role of RBI in issue of coins?
The role of RBI is limited to distribution of coins that are supplied by Government of India. The responsibility for coinage vests with the Government of India on the basis of the Coinage Act, 2011, as amended from time to time.
》Who is responsible for changing the design of coins from time to time?
The Government of India is responsible for the designing and minting of coins in various denominations.
》What is currency paper made of?
Currency paper is composed of cotton and cotton rag.
》 Who decides on the volume and value of banknotes to be printed and on what basis?
The Reserve Bank based on the demand requirement indicates the volume and value of banknotes to be printed each year to the Government of India which get finalized after mutual consultation. The quantum of banknotes to be printed, broadly depends on the requirement for meeting the demand for banknotes, GDP growth, replacement of soiled banknotes, reserve stock requirements, etc.
》Who decides on the quantity of coins to be minted?
The Government of India decides on the quantity of coins to be minted on the basis of indents 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, inflation rate, the replacement demand and reserve stock requirements by using statistical models/techniques.
》Where are notes and coins produced?
Notes are printed at four printing presses located at Nashik, Dewas, Mysore and Salboni. Coins are minted at the four mints at Mumbai, Noida, Kolkata and Hyderabad.
》How does the Reserve Bank reach the currency to people?
The Reserve Bank presently manages the currency operations through its 19 Issue offices located at Ahmedabad, Bangalore, Belapur, Bhopal, Bhubaneswar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, New Delhi, Patna, Thiruvananthapuram, a currency chest at Kochi and a wide net work of currency chests. These offices receive fresh banknotes from the banknote printing presses. The Issue Offices of RBI send fresh banknote remittances to the designated branches of commercial banks.
The Reserve Bank offices located at Hyderabad, Kolkata, Mumbai and New Delhi (Mint linked Offices) initially receive the coins from the mints. These offices then send them to the other offices of the Reserve Bank who in turn send the same to currency chests and small coin depots. The banknotes and rupee coins are stocked at the currency chests and small coins at the small coin depots. The bank branches receive the banknotes 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 banknotes and rupee coins, the Reserve Bank has authorised 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. As on December 31, 2013, there were 4209 currency chests. The currency chest branches are expected to distribute banknotes and rupee coins to other bank branches in their area of operation.
》What is a small coin depot?
Some bank branches are authorised to establish Small Coin Depots to stock small coins i.e. coins below Rupee one. The Small Coin Depots also distribute small coins to other bank branches in their area of operation. As on December 31, 2013, there were 3966 small coin depots.
》What happens when the banknotes and coins return from circulation?
Banknotes returned from circulation are deposited at the Issue offices of the Reserve Bank. The Reserve Bank subjects these to processing, authenticates banknotes for their genuineness, segregates them into notes fit for reissue and those which are unfit, for cancellation.
The banknotes which are fit for reissue are sent back in circulation and those which are unfit for reissue are destroyed by way of shredding after completion of examination process. Coins do not come back from circulation, except those which are withdrawn.
From where can the general public obtain banknotes and coins?
Presently, banknotes and coins can be obtained in exchange at RBI offices and all branches of banks. This function is being delegated by RBI to commercial banks.
● I.Coins
Coins in India are presently being issued in denominations of 50 paisa, one rupee, two rupees, five rupees and ten rupees. Coins up to 50 paisa are called ‘small coins’ and coins of Rupee one and above are called ‘Rupee Coins’.
Coins in the denomination of 1 paisa, 2 paisa, 3 paisa, 5 paisa, 10 paisa, 20 paisa and 25 paisa have been withdrawn from circulation with effect from June 30, 2011 and are, therefore, no more legal tender.
■II.Currency:
Banknotes in India are currently being issued in the denomination of Rs. 10, Rs. 20, `50, Rs. 100 Rs. 500, and 2000. These notes are called banknotes as they are issued by the Reserve Bank of India (Reserve Bank).
The printing of notes in the denominations of Rs. 1, Rs. 2 and Rs. 5 has been discontinued as these denominations have been coinised.
However, such banknotes issued earlier can still be found in circulatio
n and these banknotes continue to be legal tender.
》What is the Indian currency called?
The Indian currency is called the Indian Rupee (INR) and the coins are called paisa. One Rupee consists of 100 paisa. The symbol of the Indian Rupee is . The design resembles both the Devanagari letter “” (ra) and the Latin capital letter “R”, with a double horizontal line at the top.
》Can banknotes and coins be issued only in these denominations?
Not necessarily. The Reserve Bank can also issue banknotes in the denominations of five thousand rupees and ten thousand rupees, or any other denomination that the Central Government may specify. However, there cannot be banknotes 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 in terms of The Coinage Act, 2011.
》Demonetization of higher denomination banknotes.
Rs. 1000 and Rs. 10000 banknotes, which were then in circulation were demonetized in January 1946, primarily to curb unaccounted money.
The higher denomination banknotes in Rs. 1000, Rs. 5000 and Rs. 10000 were reintroduced in the year 1954, and these banknotes (Rs. 1000, Rs. 5000 and Rs. 10000) were again demonetized in January 1978.The Rs. 1,000 note made a comeback in November 2000. Rs. 500 note came into circulation in October 1987. The move was then justified as attempt to contain the volume of banknotes in circulation due to inflation. However, this is the first time that Rs. 2,000 currency note is being introduced.
》What is legal tender?
The coins issued under the authority of Section 6 of The Coinage Act, 2011, shall be legal tender in payment or on account i.e. provided that a coin has not been defaced and has not lost weight so as to be less than such weight as may be prescribed in its case: – (a) coin of any denomination not lower than one rupee shall be legal tender for any sum, (b) half rupee coin shall be legal tender for any sum not exceeding ten rupees,
Every banknote issued by Reserve Bank of India (Rs. 2, Rs. 5, Rs. 10, Rs. 20, Rs. 50, Rs. 100, Rs. 500 and Rs. 1000) shall be legal tender at any place in India in payment or on account for the amount expressed therein, and shall be guaranteed by the Central Government, subject to provisions of sub-section (2) Section 26 of RBI Act, 1934.
》What is the meaning of “I promise to pay” clause?
As per Section 26 of Reserve Bank of India Act, 1934, the Bank is liable to pay the value of banknote. This is payable on demand by RBI, being the issuer. The Bank’s obligation to pay the value of banknote does not arise out of a contract but out of statutory provisions.
The promissory clause printed on the banknotes i.e., “I promise to pay the bearer the sum of Rupees …is a statement which means that the banknote is a legal tender for the specified amount. The obligation on the part of the Bank is to exchange a banknote with bank notes of lower value or other coins which are legal tender under the Indian Coinage Act, 2011, of an equivalent amount.
》Why is One Rupee liability of the Government of India?
The One Rupee notes issued under the Currency Ordinance, 1940 are also legal tender and included in the expression Rupee coin for all the purposes of the Reserve Bank of India Act, 1934. Since the rupee coins issued by Government constitute the liabilities of the Government, one rupee is also liability of the Government of India.
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