History Of The Indian Rupee
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The currency of India is the rupee. Rupee is derived from the Sanskrit rupyakam which means coin of silver (“Indian Rupee”). The rupee has transitioned through several governing bodies over its recorded history. Each transitional phase can be traced by the examples of the rupee notes as follows: early private and semi-governmental banks, Government of India, King George V, King George VI, Indo-French Territories, Indo-Portuguese Territories, Prisoner-of-War Coupons, Princely States, cash coupons of Princely States, and post Independent India (Indian Currency Collector Online).
Early Private and Semi-Governmental Banks (1770-1861 A.D.)
The European traders, especially those with the East India Company, were familiar with using paper currency to further paying for their trades. Previously in India, banking existed dating all the way back 500 B.C. as a commercial activity among the tradesmen of the time (Reserve Bank of India). Yet as the European traders began their commerce in India no form of paper currency existed. Private Banks were created, initially in the province of Bengal. The first such bank to implement paper money was established by Governor Warren Hastings in Calcutta around 1770 A.D. (Jhunjhunwalla Online).
Following the first Private Bank, the Bank of Bengal was formed. The paper money printed by the Bank of Bengal was circulated on a much wider basis, as well as being accepted as payment for certain government dues. The Bank of Bengal was the first bank in India to have a government share in its working capital. The paper money the Bank of Bengal issued ranged in denominations from rupee (Rs.) 10 to rupee (Rs.) 1000 (Jhunjhunwalla Online).
Bombay had a large commercial boom in the 19th century. This boom led to the Bank of Bombay being established, which was chartered in 1840. Bank of Bombays charter meant the bank had the authority to issue and print its own paper money or notes. Bank of Bombay also enjoyed a government share in its capital. The notes issued by Bank of Bombay ranged in denominations ranging in value from Rs. 10 to Rs. 10,000. The majority of the notes issued by the Bank of Bombay included a signature portion which was cut off after being cashed (Indian Currency Collector).
Bank of Madras was the final presidency bank to be formed, it was established in 1842. Bank of Madras was not approved by the government (Madras Presidency) for payment of government dues, which limited the circulation of their notes substantially. The notes ranged in values from Rs. 10 to Rs. 3,000 (Keynes p.38).
There were several other private banks which issued their own notes during this time, yet their circulation was extremely limited due to lack of government support. These banks include The Bank of Hindostan, The Union Bank, The Commercial Bank, The Calcutta Bank in Bengal, The Bank of Western India, The Oriental Bank, The Commercial Bank of India in Bombay, The Madras Government Bank and The Asiatic Bank in Madras (Indian Currency Collector).
“Government of India” (1861-1925 A.D.)
The governance of India was transferred from the East India Company to the British Crown after the conflicts of 1857-58. Sir James Wilson, the Finance Member of the Governor-Generals Council also known as the Executive Council of the Viceroy, weighed the validity of state-run paper currency. As such, an administrative system was formed to control the issue, circulation and destruction of notes through ÐIssue Offices and treasuries, under Head Commissioner of Currency in 1859 (Jhunjhunwalla Online).
The Indian/British Government began guaranteeing payment on the notes introduced into circulation through the Indian Paper Money Act of 1861 (Indian Currency Collector). The Indian Paper Money Act of 1861 established “circles” to issue the Indian paper notes, and the circles had sub-circles under them. Initially, notes issued in one circle were not circulated outside of that specific circle, and the notes could only be cashed within the issuing circle or a sub-circle office under the issuing circle. The circles that were formed were Bombay, Calcutta, Madras and Rangoon. Bombays sub-circles were Akola and Karachi, Calcuttas sub-circles were Lahore, Allahabad and Cawnpur, and Madrass sub-circles were Vizagapatam, Cocinada and Trichinopoly (Jhunjhunwalla Online).
The first series of notes issued under the act of 1861 carried the portrait of Queen Victoria, but those designs were quickly modified to account for the original simplicity. The notes were printed on watermarked paper in England and included the signatures of Lord Canning (The Viceroy) and Samuel Laving (the successor Finance Member). The denominations of these notes were: Rs. 10, Rs. 20, Rs. 50, Rs. 100, Rs. 500 and Rs. 1,000 (Indian Currency Collector).
In the early 1900s as paper currency grew in popularity, the notes were “universalized” to ease the restrictions on cashing the notes only within originating circle(s). The restrictions were eased gradually, with the smaller denominations being universalized first. The issuing circle name continued to be printed on the notes, either in full or as initials (Keynes p.44).
King George V (1917-1932 A.D.)
The crisis of precious metal supplies during World War I in 1917 lead to the first notes featuring King George Vs picture. The government also issued lower denominations of the rupee for the first time, specifically the Rs. 1 and Rs. 2.5. During the 1920s, notes featuring King George Vs portrait were issued in Rs. 10 and Rs. 5 denominations (Indian Currency Collector). The government began to pursue the process of printing Indian paper notes in India, rather than in England where all notes up to this point were printed. The first printing press was set up in Nasik, in the Bombay Presidency. The Nasik press was inaugurated in 1926, and initially printed Rs. 10 of a new design. Soon after the Nasik press began printing notes of 50 and 100 rupees. Printing offices were also established in Calcutta, Bombay, Madras, Delhi, Karachi, Kanpur, Lahore and Rangoon (Jhunjhunwalla Online). The notes featuring King George Vs portrait remained in circulation well after his death in 1936.
King George VI (1937-1957 A.D.)
King George VI, George Vs younger brother, assumed control of Britain and its territories after Edward VIII had to abdicate the throne. During King George VIs rule, the Reserve Bank of India, which was created in 1935, was further established (Chacko p.20). The responsibility of issuing Indias notes was assigned to the Reserve Bank of India; as such the