Design and Issuance of Indian Currency

OCT 26

Preliminary   > Economic Development   >   Indian Economy and Issues   >   Monetary policy

Why in news?

  • Recently, Delhi CM asked the central government to put pictures of Goddess Lakshmi and Lord Ganesh on currency notes in order to bring “prosperity” to the country.

About Design and Issuance of Indian Bank Notes and Coins:

  • The Reserve Bank of India (RBI) and the Central Government decide the changes in the design and form of bank notes and coins.
  • Any change in design of a currency note has to be approved by the RBI’s Central Board and the central government.
  • Changes in the design of coins are the prerogative of the central government.

Role of RBI in Issuing Notes:

  • Section 22 of The Reserve Bank of India Act, 1934, gives RBI the “sole right” to issue banknotes in India.
  • The central bank internally works out a design, which is put before the RBI’s Central Board.
  • 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 RBI’s Central Board”.
  • The RBI’s Department of Currency Management, currently headed by Deputy Governor, has the responsibility of administering the core function of currency management.
  • If the design of a currency note has to change, the Department works on the design and submits it to RBI, which recommends it to the central government. The government gives the final approval.

Role of Central Government in minting of coins:

  • The Coinage Act, 2011 gives the central government the power to design and mint coins in various denominations.
  • The role of the RBI is limited to the distribution of coins that are supplied by the central government.
  • The government decides on the quantity of coins to be minted on the basis of indents received from the RBI on a yearly basis.
  • Coins are minted in four mints owned by the Government of India in Mumbai, Hyderabad, Kolkata and Noida.

RBI’s Currency Management System:

  • RBI, in consultation with the central Government and other stakeholders, 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 their supply.
  • Two of India’s currency note printing presses (Nasik and Dewas) are owned by the Government of India; two others (Mysore and Salboni) are owned by the RBI through its wholly owned subsidiary, Bharatiya Reserve Bank Note Mudran Ltd (BRBNML).
  • Notes that are received back from circulation are examined, after which those fit for circulation are reissued, while the soiled and mutilated notes are destroyed.

PRACTICE QUESTION:

Consider the following statements:

1. Any change in design of a currency note has to be approved by the RBI’s Central Board and the central government.

2. The Coinage Act, 2011 gives RBI the power to design and mint coins in various denominations

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer