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Early Issues

Paper Money, as we know it today, was introduced in India in the late 18th 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 Hindustan (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 Hindustan
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 categorized 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.
Unifaced Notes of the Bank of Bengal
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 colors to deter forgeries.

Commerce Series Brittania Series

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.

Note issued by the Bank of Bombay

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.
Contemporary Coins

Five Rupee Coins (New)

Metal Ferritic Stainless Steel (FSS)

Weight 6.00 gms

Diameter 23 mm

Shape Circular

Five Rupee Coins (Old)

Metal Cupro-Nickel

Weight 9.00 gms

Diameter 23 mm

Shape Circular

Two Rupee Coins (New)

Metal Ferratic Stainless Steel

Weight 5.62 gms

Diameter 27 mm

Shape Circular

Two Rupee Coins (Old)

Metal Cupro-Nickel

Weight 6.00 gms

Diameter 26 mm

Shape Eleven Sided

One Rupee Coins

Metal Ferratic Stainless Steel

Weight 4.85 gms

Diameter 25 mm

Shape Circular

Fifty Paise

Metal Ferratic Stainless Steel

Weight 3.79 gms

Diameter 22 mm

Shape Circular

Twenty Five Paise

Metal Ferratic Stainless Steel

Weight 2.83 gms

Diameter 19 mm

Shape Circular

Ten Paise

Metal Ferratic Stainless Steel

Weight 2.00 gms

Diameter 16 mm

Shape Circular
The Reserve Bank of India is the central bank of the country. Central banks are a relatively
recent innovation and most central banks, as we know them today, were established around the
early twentieth century.

The Reserve Bank of India was set up on the basis of the recommendations of the Hilton Young
Commission. The Reserve Bank of India Act, 1934 (II of 1934) provides the statutory basis of
the functioning of the Bank, which commenced operations on April 1, 1935.

The Bank was constituted to

 Regulate the issue of banknotes

 Maintain reserves with a view to securing monetary stability and
 To operate the credit and currency system of the country to its advantage.
The Reserve Bank of India was set up as a Share Holders' Bank. The Share Issue of the Bank
offered in March, 1935 was the largest share issue in India at the time. The matter was further
compounded by the conditions and restrictions imposed under the Act. These conditions related
to qualifications of the shareholders, the geographical distribution and allotment of shares (to
avoid concentration of shares and to ensure that those holding the shares were fit and proper. To
simplify matters, Share Certificate Forms of the different registers were printed in different
colors. Despite the intricate and gigantic nature of the task, it was carried out with great 'accuracy
and dispatch
A message sent by the Viceroy to the Governor, Osborne Smith when the Reserve Bank of India
commenced its operations on 1st April, 1935


Osborne Smith Governor Reserve Bank Calcutta. Following Has Been Received From
Secretary For You. Begins, As Reserve Bank Commences Operations Today I Take Opportunity
To Convey You And Your Colleagues On The Board My Most Good Wishes And To Express
My Confidence That This Great Undertaking Will Contribute Largely To The Economic Well
Being Of India And Of Its People. Private Secretary Viceroy
Reserve Bank Begins Business
Bombay Office
Functions Taken Over From Imperial Bank

In Bank Street Bombay under an ironwork verandah, recalling more than one Shaftesbury
Avenue Theatre is a new very large brass plate. Across the plate are written the words "Reserve
Bank of India". To right and left of the plate are open doors, for the Bank is now open to the
public and business is in full swing to the tune of much hammering. The overpowering smell of
fresh paint and the rushing to and fro of new peons in new drab brown suits.
The building is a famous one having housed for many years the Bombay Head Office of the
Imperial Bank of India. It will become more famous now as the head office in the west of India
for the Reserve Bank. It is old fashioned as banking buildings go, but has three roomy floors and
ample space.

Managing this new concern is Mr. W.T. Mc Callum from the Imperial Bank of India. He has a
staff of 180. The Bank will have no branches but will work in mofusil through the branches of
the Imperial Bank. The Reserve Bank Head Office is situated in Calcutta.

Bankers' Clearing House

The Reserve Bank opened by taking over the Public Debt Office, the Public Accounts Office and
the Currency Department. It will not resume its full responsibilities until July 1 when the
accounts of the Scheduled Banks will be taken over under Section 42 of the Act. Within a few
weeks it will take the Bankers' Clearing House. To counter balance the removal of these
important functions from the Imperial Bank of India that Bank will extend more along the lines
of the regular commercial banking firm. It is now free to deal in exchange business whereas
hitherto it hqad to work through other banks. A start has not, however, actually been made.

It is also understood that the Imperial Bank will open a new department, which will enable it to
undertake the work of trustees and executors.
The Reserve Bank of India was nationalized with effect from 1st January, 1949 on the basis of
the Reserve Bank of India (Transfer to Public Ownership) Act, 1948. All shares in the capital of
the Bank were deemed transferred to the Central Government on payment of a suitable
compensation. The image is a newspaper clipping giving the views of Governor CD Deshmukh,
prior to nationalization.
The Bank began its operations by taking over from the Government the functions
so far being performed by the Controller of Currency and from the Imperial Bank
of India, the management of Government accounts and public debt. The existing
currency offices at Calcutta, Bombay, Madras, Rangoon, Karachi, Lahore and
Cawnpore (Kanpur) became branches of the Issue Department. Offices of the
Banking Department were established in Calcutta, Bombay, Madras, Delhi and

Burma (Myanmar) seceded from the Indian Union in 1937 but the Reserve Bank
continued to act as the Central Bank for Burma till Japanese Occupation of Burma
and later up to April, 1947. After the partition of India, the Reserve Bank served
as the central bank of Pakistan up to June 1948 when the State Bank of Pakistan
commenced operations. The Bank, which was originally set up as a shareholder's
bank, was nationalized in 1949.

An interesting feature of the Reserve Bank of India was that at its very inception,
the Bank was seen as playing a special role in the context of development,
especially Agriculture. When India commenced its plan endeavours, the
development role of the Bank came into focus, especially in the sixties when the
Reserve Bank, in many ways, pioneered the concept and practice of using finance
to catalyze development. The Bank was also instrumental in institutional
development and helped set up institutions like the Deposit Insurance and Credit
Guarantee Corporation of India, the Unit Trust of India, the Industrial
Development Bank of India, the National Bank of Agriculture and Rural
Development, the Discount and Finance House of India etc. to build the financial
infrastructure of the country.

With liberalization, the Bank's focus has shifted back to core central banking
functions like Monetary Policy, Bank Supervision and Regulation, and Overseeing
the Payments System and onto developing the financial markets.

Hundis refer to financial instruments evolved on the Indian sub-continent used in trade and credit
transactions. They were used

 as remittance instruments (to transfer funds from one place to another),

 as credit instruments (to borrow money [IOUs]),
 For trade transactions (as bills of exchange).

Technically, a Hundi is an unconditional order in writing made by a person directing another to

pay a certain sum of money to a person named in the order. Hundis, being a part of the informal
system have no legal status and are not covered under the Negotiable Instruments Act, 1881.
Though normally regarded as bills of exchange, they were more often used as equivalents of
cheques issued by indigenous bankers.

British India Hundi

Bank Memo to a Hundi Foreign Bill

Opium Hundi Princely State Hundi


A Representative Dashing Hundi.

Early 20th Century

Nisani Hamare Gharu khate nam mandna.

Dastkhat Brijkishore Bhargava ke hundi likhe mujib sikar desi.


Sidh sri Patna subhastane chiranjeeva bhai Rikhabchand Bridhichan yog sri Jaipur se
likhi Brijkishore Bhargava kee asis banchna, apranch hundi aik rupia 2,000 akshare
rupia do hazar ke nime rupia aik hazar ka duna yahan rakha sah Sri Punamchandji
Harakchandji pas miti Mangsir bad baras (12th) puga turat sah-jog rupia chalan ka
dena. Sambat 1990, Miti Mangsir bad baras, Rs.2,000

Neme Neme rupia panchsau ka chauguna pura do hazar kardejo.

'1' Chiranjeeva Rikhabchand Bridhichand, Patna.


Place it to the debit of our account.

Signature: Honour the Hundi written by Brijkishore Bhargava.

Greetings to Messrs. Rikhabchand Bridhichand, son of the fair city of Patna on whom
the Hundi for Rs 2,000 (in words Rupees Two thousand only) is written by Brij Kishore
Bhargava from Jaipur. Rupees one thousand if doubled make the sum of the hundi.
The hundi has been drawn from here in favour of Messrs. Punamchand Harackchand
on 12th Mangsir 1990, which please honour on presentation in the current money.


Four times of Rs. 500 make the sum of Rs. 2,000 for which the hundi is drawn.

Watermark on Hundis

Revenue Seals appearing on Hundis

British India
Embossed Seal: Queen Victoria

Embossed Seal: Queen Victoria

Adhesive Stamps used on Private Issues

Revenue form: Portrait of King Edward

Revenue Form: Ashoka Pillar

• Inagurated in 1935 with a share capital of Rs. 5 cr.

• The Government of India held shares of nominal value of Rs. 2,22,000.

• RBI was nationalized in 1949.


Central Board Of Directors of 20 Members

• Governor & 4 dy. Governors.
• 1 Government official from ministry of finance.
• 10 directors by Govt. of India
• 4 directors by central Govt. (represent local board)


 Bank of issue.
 Banker to government.
 Banker’s bank.
 Controller of credit.
 Custodian of foreign exchange reserves.
 Supervisory functions
 Promotional functions

• Sole right to issue bank notes of all denominations.
• Separate issue department for issue of currency notes.
• Original assets:
2/5th of gold coins, gold bullion or sterling securities for amount of gold not less than Rs. 40 cr.
3/5th held in rupee coins, goi rupee securities, promissionary notes payable in India.
• Modified provisions since 1957 (post-war period)maintain gold & foreign exchange reserves of
Rs. 200 cr, of which Rs. 115 cr. should be in gold.
• This system is called as “Minimum Reserve System”.

• Act as government banker, agent and adviser.
• Obligation to transact Govt. Business i.e.Receive & make payments on behalf of govt.
• Helps Govt. To float new loans & to manage public debt.
• Acts as adviser to the Govt. On all monetary & banking matters.

• Every scheduled bank was required to maintain a cash balance equivalent to 5% of its demand
liabilites & 2% of its time liabilites with RBI.
• At present banks keep cash reserves equal to 3%of their aggregate deposit liabilities.
• Scheduled banks can borrow or get financial accomodation in times of need.
• Since commercial banks always expect RBI to come to their help in time of crisis, RBI also
becomes “Lender Of The Last Resort”.

• RBI holds the cash reserves of all the scheduled banks.
• It controls the credit operations of banks thro’ quantitative & qualitative controls.
• It controls the banking system thro’ the system of licensing, inspection and calling for
• It acts as the lender of the last resort by providing rediscount facilities to scheduled banks.


• Maintains the official rate of exchange.
•Acc. to RBI act of 1934, bank was required to buy and sell at fixed rates(amount not > 10,000)
•After becoming a member of the I.M.F i.e. “International Monetary Fund” in 1946, RBI
maintains fix exchange rate with all other member countries of the I.M.F.
•RBI acts as the custodian of India’s reserve of international currencies.

• RBI has certain non-monetary functions.
•Supervision of banks.
•Promotion of sound banking in India.
•RBI is authorized to carry out periodical.

• Nationalization of 14 major Indian scheduled banks in July 1969 imposed new responsibilities
on rbi for directing the growth of banking and credit policies towards rapid economic growth.

• Promote banking habit.
• Extend banking facilities to rural & semi-urban areas.
• Establish & promote new specialized financing agencies.


•deposit insurance corporation (1962)
•Unit trust of India (1964)
•Industrial dev. bank of India (1964)
•Agricultural refinance corporation of India (1963)
•Industrial reconstruction corporation of India (1972)
• The bank has developed co-operative credit movement to:
Encourage saving.
Eliminate money-lenders from village
• RBI with help of ardc provides long-term finance to farmers.