Currency notes reflect the nation’s rich and diverse culture, her struggle for freedom and her proud achievements as a nation.
With a view to bringing the identity closer to the cultural heritage of the country as also for showcasing her scientific advances, a new series of notes in a new design is being launched.
The new design bank notes are distinctly different from the current Mahatma Gandhi Series of bank notes in colour, size and theme. The theme of the new series notes is India’s heritage sites.
A few new other elements added in these notes are numerals in devnagari and the logo of Swachh Bharat. The new notes also have design elements in myriad and intricate forms and shapes.
While the security features in the current series of bank notes, such as water mark, security thread, latent image of denomination numeral, denomination numeral in colour shifting ink, number panels, see through register, electro-type, bleed lines, etc., continue to remain, their relative positions may have changed in the new design notes.
Why do we need money?
Money has value because people trust that it has value today and will continue having value in the future. But history shows that this trust is sometimes broken, so why do people keep on using money? The answer is that it is incredibly useful for facilitating trade, which in turn has led to higher living standards.
Trade allows people to specialise in producing those things in which they have a comparative advantage. Even the most capable person would struggle if they had to find food, build shelter and make clothes entirely on their own. If that individual lived within a community, however, and could trade with others, then each community member could specialise in one area – maybe fishing, building houses or making clothes – and become very skilled in that task. By trading with each other, each member of the community would benefit from the specialist skills developed by the other community members.
So what is the role of money? It enables production and trade on a large scale. If you live in a small village where you know and trust everyone, you may be willing to give up some of your fish catch today to others in the knowledge that when you need (for example) clothes, the tailor will give you something to wear. If you live in a larger town, where you may not know or trust people so well, you probably won’t give away your fish to anyone who asks, as you might not trust, for example, that a tailor will give you new clothes if you ask later on. While you could try to solve this problem of lack of trust with barter, barter usually doesn’t work very well. For example, the tailor might not want your fish when you need new clothes – indeed, the tailor might not ever want fish, nor have the specific clothes you need. With money, however, you can sell your fish to whoever wants fish, save some of the money they pay you and take it to the tailor when you need clothes (or to whomever you want to purchase something from and whenever you need to).
In brief, money makes trade with people we might not know or trust possible, and trade makes a society prosperous. Trust is now placed in the value of money, rather than in every person we might want to buy from or sell to.
What forms of money are used in a modern economy?
There are two main forms of money that exist in modern economies:
- coins and banknotes (i.e. currency)
- deposits held in accounts at banks or other authorised deposit-taking institutions.
Currency is a physical form of money, while deposits held in accounts with a financial institution are a digital form of money and comprise the greatest share of money in a modern economy. (Learn more in the Bulletin article on Money in the Australian Economy.) There is also a subtle difference between currency and deposit account balances. Currency is backed by the central bank, which eliminates any risk of default. Deposit account balances, on the other hand, are liabilities of privately owned financial institutions (because the depositor can ask for them back) and these institutions are at possible risk from default. Nonetheless, while this risk has materialised in some countries, in Australia it is extremely low. (Australia’s banks are well capitalised and regulated, depositors are paid out first if a bank gets into trouble, and there is a Financial Claims Scheme in which the government provides a limited guarantee for household deposits of individuals below $250,000.)
What is the future of money?
Money has changed form many times over the years, but for as long as complex societies have existed, there has been money. The only confident prediction that can be made about money is that as long as people want to trade with each other, money will continue to exist in some form because the functions it performs are central to sustaining economic activity.
How Does Banknotes Work?
The history of banknotes can be traced back to the seventh century. This is the time when China first came up with the concept of paper money by releasing receipts. However, the evolution of paper money took time.
In the early days, the objects like gold or silver were offered by people for buying goods or services from the other party. But eventually, these physical assets were replaced with bank notes.
In old times, there was no central bank. All commercial banks could print and issue their own notes, lay down their requirements, and cooperate with each other. Banks would secure these notes with gold. People used to transact using these notes. Thus, allowing the exchange of objects of value.
But over time, with the emergence of the central banking system, the power to issue the bank notes vested in the Federal Reserve Bank. Thus, the Federal Reserve attained monopoly over their printing and issue. These notes were also backed by the U.S. government, making it a legal instrument.Money & Types of Money
Money is the most commonly accepted form of exchange for goods and services. It can be anything as long as it satisfies three conditions:
- Medium of exchange
- Store of value
- Unit of account
Currency refers to the aggregate of coins and paper notes (paper money). Paper money is generally accepted in daily transactions as a mode of exchange for goods and/or services. Paper money refers to banknotes. Bills of exchange and cheques are negotiable credit instruments, not paper money.
Commodity Money is a type of money that has value in and of itself, such as gold, silver, or other precious metals.
Fiat Money is a type of money that is not backed by any physical commodity, but is instead declared by the government to be legal tender.
Fiduciary Money is a type of money that is backed by the credit of the issuing institution, such as a bank or government.
The Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL)
The BRBNMPL is a wholly-owned subsidiary of the Reserve Bank of India (RBI). It was established in 1995 to print banknotes for the RBI. The BRBNMPL is responsible for printing all of the banknotes that are currently in circulation in India.
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Even during this time, the notes were redeemed to the Federal Reserve in gold. However, in 1971, the gold standard came to an end. The U.S. came up with the fiat system. Under this, the notes were issued in good faith rather than any security. It meant that the Federal Reserve stood behind the note and it must be universally accepted as a unit of specific value.
At present, the U.S. Bureau of Engraving and Printing (BEP) prints Federal Reserve Notes. The Federal Reserve issues them to the commercial banks for circulation. To obtain the notes, the commercial banks must maintain a reserve account with the Federal Reserve and pay its face value.
What is the Indian currency called and what is its symbol?
The Indian currency is called the Indian Rupee (INR). One Rupee consists of 100 Paise. 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.
What is the role of the Reserve Bank of India in currency management?
In terms of Section 22 of the Act, Reserve Bank has the sole right to issue banknotes in India. Section 25 states that the design, form and material of bank notes shall be such as may be approved by the Central Government after consideration of the recommendations made by the Central Board of RBI.
The Reserve Bank, in consultation with the Central Government and other stake holders, estimates the quantity of banknotes that are likely to be needed denomination-wise in a year and places indents with the various currency printing presses for supply of banknotes. The Reserve Bank, in terms of its clean note policy, endeavours to ensure circulation of good quality banknotes to the members of public. With this objective in view, the banknotes received back from circulation at its Issue Offices and Currency Chests are examined and only notes considered fit for circulation are reissued while the others (soiled and mutilated) are destroyed.
In respect of coins, the role of RBI is limited to distribution of coins that are supplied by Government of India (GoI). The GoI is responsible for designing and minting of coins in various denominations as per the Coinage Act, 2011.
What Is the Difference Between a Banknote and Regular Money?
Today, there is little difference between the term “banknote” and other types of currency. Historically,
the term “bank note” originated from the historical period when banks could issue their own paper currency, backed by the value of their gold and silver deposits.
In respect of coins, the role of RBI is limited to distribution of coins that are supplied by Government of India (GoI).
The GoI is responsible for designing and minting of coins in various denominations as per the Coinage Act, 2011.
Today, the right to print notes is usually reserved to a country’s central bank, although there are some countries that delegate that authority to commercial banks.
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What is the role of the Reserve Bank of India in currency management?
Reserve Bank has the sole right to issue banknotes in India. Section 25 of RBI Act, 1934 states that the design, form and material of bank notes shall be such as may be approved by the Central Government after consideration of the recommendations made by the Central Board of RBI.
The Reserve Bank, in consultation with the Central Government and other stake holders, estimates the quantity of banknotes that are likely to be needed denomination-wise in a year and places indents with the various currency printing presses for supply of banknotes. The Reserve Bank, in terms of its clean note policy, endeavours to ensure circulation of good quality banknotes to the members of public. With this objective in view, the banknotes received back from circulation at its Issue Offices and Currency Chests are examined and only notes considered fit for circulation are reissued while the others (soiled and mutilated) are destroyed.
In respect of coins, the role of RBI is limited to distribution of coins that are supplied by Government of India (GoI). The GoI is responsible for designing and minting of coins in various denominations as per the Coinage Act, 2011.
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, Bengaluru, Belapur, Bhopal, Bhubaneswar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, New Delhi, Patna, Thiruvananthapuram and a currency chest at its Kochi office. Further, a wide network of currency chests maintained and managed by scheduled banks are part of currency management architecture. The Issue Offices receive fresh banknotes from the currency printing presses which in turn send fresh banknote remittances to the currency chests. Direct remittances of fresh banknotes by the presses to select currency chests also happen.
The Reserve Bank offices located at Hyderabad, Kolkata, Mumbai and New Delhi (Mint Linked Offices) receive coins from the mints. These offices then send the coins 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.