The Reserve Bank of India (RBI) has the sole right to issue currency notes in India. This right is guaranteed only to a particular entity (a person or organization) and nobody else. It is an unshared authority, an exclusive privilege, or a monopoly to do something without open competition. It is usually granted by a sovereign authority (e.g. parliament) to execute significant tasks.
The Section 22(1) of the Reserve Bank of India Act, 1934 (amended 7th January 2013) empowers RBI with the sole right to issue banknotes of all allowed denominations for their circulation in India.
Currently, the banknotes issued in India range from a higher denomination of ₨.1000 to the lowest denomination of ₨.5.
In India, there are nine unique banknotes in circulation, namely;
- ₨.1 note,
- ₨.2 note,
- ₨.5 note,
- ₨.10 note,
- ₨.20 note,
- ₨.50 note,
- ₨.100 note,
- ₨.500 note, and
- ₨.1000 note.
Though the issuance of new one rupee and two rupees notes has been discontinued (stopped printing), their old counterparts are still valid and are in circulation in the Indian market.
Section 24(1) of RBI Act 1934, has authorized the Reserve Bank of India to issue notes with denominations higher than one thousand such as ₨.5000 note and ₨.10,000 note. However, it has been restricted to issue only up to the maximum face value of ten thousand rupees. Hence, there is a possibility in the future to see ₨.5000 and ₨.10,000 notes in circulation. But such chances are less likely to occur since the availability of higher denominations is likely to proliferate black money transactions and may result in tax evasion.
The metal coins available in India now range from a higher denomination of ₨.10 coin to a lower denomination of 10 Paise coin.
Currently, there are eight coins with unique designs in circulation namely;
- 10 Paise coin,
- 20 Paise coin,
- 25 Paise coin (also called Chavanni or Charana),
- 50 Paise coin (Atthani or Aathana),
- One Rupee coin (Ek Rupaya),
- Two Rupees coin (Dau Rupaye),
- Five Rupees coin (Paanch Rupaye), and
- Ten Rupees coin (Dus Rupaye).
The coins from 10 Paise up to 50 Paise are known as ‘Small Coins’ whereas those from One Rupee to Ten Rupees are called ‘Rupee Coins.’
The coins of 5, 10, and 20 paise are now not accepted in the market, and even their minting and issuance has been stopped.
The 25 paise coin ceased its status as a legal tender on 30th June 2011.
Now even 50 paise coin has started to lose its sheen in the market but RBI insist that it’s still a legal tender and should be accepted.
The Section 4 of The Coinage Act, 2011 specifies that metal coins can be minted (only as per provisions established by law) up to a higher denomination of one thousand rupees.
The liabilities (responsibilities specified under law) of the Issue Department are in Section 34(1) of RBI Act 1934.
Issue Department is liable for a total or aggregate value (AV) of:
- The currency notes (CN) issued by Government of India (GOI) (before the issuance of bank notes by RBI), and
- Bank notes (BN) issued by RBI in circulation for the time being.
- Here, AV = CN by GOI + BN by RBI.
Issue Department maintains eligible assets equivalent in value to that of aggregate value (AV) for backing the issued bank notes.
As per Section 33(1) of RBI Act 1934, these assets mainly comprises:
- Coins and Bullions (bars) of Gold,
- Foreign Securities,
- Rupee Coin and
- Rupee Securities.
Issue Department’s assets and liabilities are separate from the Banking Department of RBI.
Issue Department issues currency notes when the Banking Department raises demand. While raising such a demand, the Banking Department has to transfer government and other approved securities to it.
Different methods or systems are used to regulate the issue of notes. In the Indian context, two such methods are noteworthy, namely;
- Proportional Reserve System, and
- Minimum Reserve System.
The following seven references were used to compile this article:
- ^ “Reserve Bank of India Act, 1934”. Retrieved 10 October 2015.
- ^ “Reserve Bank of India: Functions and Working”. Retrieved 10 October 2015.
- ^ “Coins of 5, 10 and 20 paisa are legal tender: RBI”. Retrieved 10 October 2015.
- ^ “25 paise coin to cease being legal tender money from June 30”. Retrieved 10 October 2015.
- ^ “50 paise coin losing its sheen in market”. Retrieved 10 October 2015.
- ^ “The Coinage Act, 2011”. Retrieved 10 October 2015.
- ^ Mishra and Puri. Indian Economy, 29th Edition. Chapter No.47. Page No.604. ISBN 9789350510742.