Everything to know about the Indian Currency

History

The oldest currency was made, firstly, in the form of coins. Coins came to reality in 6th Century Ancient India. They were asymmetrical in configuration and had distinctive markings to depict their values. The Mauryan Civilization was the first to use these coins to raise a robust economy. Their example was followed for eight centuries. Later, every other empire started using their inherent marked coins. By the 12th century, the Turkish Sultans of Delhi recouped the royal designs of Indian Kings with Islamic Calligraphy. But, it was the Mughal Empire from 1526 AD that brought an undivided and federate monetary system for the whole empire.

The evolution of the Indian Currency saw its most designated juncture when Sher Shah Suri issued the term ‘rupiya’ and ‘paisa’ which was used during the remaining Mughal period. Although, East India Company in 1600s wanted to introduce sterling pound in India but failed to achieve as ‘rupiya’ has already grew its popularity across India and was difficult to remove from the Indian economy.

As of yet, only coins were constituted in the Indian Currency. Paper Money was first issued in British India in the 18th century. To issue this paper currency, the term ‘Banknotes’ was introduced. The Bank of Hindostan, General Bank in Bengal and the Bengal Bank were the first bank in India. The first note which was issued by the Bengal Bank was of Two Hundred and Fifty Sicca Ruppes Note in 3rd Sep, 1812. 

In 1861, after the Paper Currency Act, currency notes in India began to be officially issued by the Government of India. The first set of Indian notes to be issued by the British Government of India featured Queen Victoria`s and were issued in denominations of Rupees 10, 20, 50, 100 and 1000.

In 1935, the Reserve Bank of India came into existence and the first paper currency issued by RBI was a 5 rupee note bearing King George VI’s portrait in January 1938. Surprisingly, RBI also printed 10,000 rupee notes which was the highest denomination ever printed in its history but was later demonetised after Independence. It is important to note that the RBI is the only establishment in the country with the power to issue paper currency for circulation.

On 15th Aug, 1950, the Republic of India replaced the British King’s portrait with Ashoka’s Lion and the tiger on the 1 rupee coin with a corn sheaf.

In 1996, the Indian Currency was introduced with prominent new features such as changed watermarks, windowed security threads, latent images and intaglio features for the visually handicapped. This was called as the ‘Mahatma Gandhi Series’.

What makes our new notes unique?

To showcase the nation’s rich and diverse culture, her struggle for freedom and her proud achievements over the years, the new Indian currencies have distinct designs that are different from the previous Mahatma Gandhi Series of bank notes in terms of colour, size and theme.

• Only few paper notes in the world have geometric figures, intricate forms and shapes that depict the various active campaigns going such as Swachh Bharat symbol in the newly formed notes.
• The motifs of Sanchi Stupa and the presence of Mangalyaan moon mission on the base of Rs. 200 and Rs. 2000 is a distinctive feature which represents the cultural roots and technological advancements present in a single country.
• Unlike old notes, the new notes have Mahatma Gandhi’s spectacles with Swachh Bharat symbol and slogan.
• The colour of the new Rs 500 note is stone grey and themed around the Red Fort in Delhi. The old Rs 500 note had a golden yellow base colour with an image of Gandhi’s Dandi March on the reverse representing a near developed nation.

Know your new notes –

NOTE –

• The new Rs. 200 note also has raised printing of the Mahatma Gandhi portrait, Ashoka Pillar emblem, the 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.
• The Reserve Bank of India issued the new Rs 500 denomination banknotes in Mahatma Gandhi (New) Series with inset letter ‘E’ in both the number panels.
• The banknote also has features (intaglio printing of Mahatma Gandhi portrait, Ashoka Pillar emblem, bleed lines, circle with Rs 500 in the right, and the identification mark) which enable the visually impaired person to identify the denomination.
• The note has the portrait of Mahatma Gandhi in the center and the micro letter ‘RBI’ and ‘2000’ on the left side of the banknote.
• The windowed security thread in Rs. 200 note changes colour from green to blue when tilted.

Value of INR in Global Market

India follows floating exchange rate system. That means, when supply of USD goes up in the Indian market, USD becomes cheap (hence INR appreciates). However when supply goes down, USD becomes costlier and thus INR depreciates. Value of Indian rupee is not in hand of RBI or government. It depends on the demand of rupee in the international market. International trade primarily takes place in dollar terms. Not every country accept Indian rupee as preferred currency for trade. As more and more people want USD, it is natural that it will make USD costlier to but in INR terms, hence depreciating INR more and more. There are several other factors working on determining the value of currency but at the end of the day it is simple equation of demand of USD and Indian rupee in international market. Every other factor directly or indirectly affects demand and thus affecting currency value.

However, not all money is created at the same rate. Besides, some currencies (USD) are absorbed better in the market than others (INR) due to varying demand. So the effective rate of currency creation is not same for all currencies. Therefore, if INR is being inflated faster than USD, it will have the effect of reducing the value of INR in comparison to USD and a reduction in value of both with respect to hard assess. The Government is also responsible for inflating the currency because it can create Government bonds out of thin air and sell it to the country’s Reserve Bank or any other buyer in exchange of currency (which it spends/wastes as it likes). When the bonds eventually reach a bank it can treat it as a deposit and issue loans against it. For example, if you’re approaching the bank for housing loan, if you pay certain percentage as a reserve, bank will create new money against your loan value. It means money is created in a thin air. No one can own the money except the banks because it’s debt note. Inflation and deflation is being controlled artificially in the name of bank rates.