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Unit 9: Indian Currency System

Each note has its amount written in 15 languages (English and Hindi and 13 other languages), Notes
illustrating the diversity of the country.

The Currency notes of ` 500, bearing a portrait of Mahatma Gandhi and Ashoka Pillar
emblem were issued by RBI from 3 October 1987.
The Current Series which began in 1996 is called the “Mahatma Gandhi Series”.

The first one-Paise coin under the decimal system was issued in March 1962 and the first
one Rupee coin in July 1962.
The Indian currency system was converted into decimal system by the Indian Coinage
Amendment act 1955 which was brought into force from 1 April 1957. The old system of
Rupee, Annas, and Paise was replaced by Rupee and Paise system.

The Mahatma Gandhi Series of banknotes is issued by the Reserve Bank of India as the
legal tender of Indian Rupee. As the name suggests, the series is so called because the
obverse of the banknotes prominently display the portrait of Mahatma Gandhi. Since its
introduction in 1996, this series has replaced all issued banknotes.
The Indian rupee symbol (officially adopted in 2010) is derived from the Devanagari
consonant (Ra) with an added horizontal bar. The symbol can also be derived from the
Latin consonant “R” by removing the vertical line, and adding two horizontal bars (like
the symbols for the Japanese and the euro). The first series of coins with the rupee symbol
was launched on 8 July 2011.

9.1.2 Demonetisation of Currency

It is important to note that demonetisation refers to the removal of flow of currency from
circulation which is done in order to trap black market currency and unaccounted money. So far
demonetisation takes place twice.
1. First Demonetisation: It was done in 1946 which called for announcement of notes of ` 100
and above. All notes of Rupees denomination and above were demonetised.
2. Second Demonetisation: - It was done in January, 1978 through which Currency notes of
higher denominations of ` 1000, ` 5000 and ` 10000 were demonetised.
Devaluation of Currency: You must understand that devaluation refers to dropping value of the
Indian Rupee in contrast to the US dollar in the world market. In 1947, India became a supporter
of the IMF (International Monetary Fund) which compelled fixing of exchange value of the
Indian rupee as per International Monetary Fund standard. Consequently, India was indulged
to devalue the rupee and so far the following devaluation takes place:
In June, 1949 the Indian Rupee was devaluated by 30.5%. Dr John Mathai was the Finance
Minister.
Second Devaluing took place in June 1966 when Sachindra Chaudhary was the Finance
Minister, whereby the Indian Rupee was further devalued by 57%.
Third and Fourth Devaluation on 1 July 1991, the Indian Rupee was devalued by nine per
cent and yet again more devalued by eleven per cent on 3 July 1991, total twenty per cent,
During the course of which, Finance Minister was Dr Man Mohan Singh. The existing
currency system in India i.e., after World War II is managed by the Reserve Bank of India
and is based on inconvertible paper currency system.
It has two aspects: (a) internal aspect, and (b) external aspect. These are as given below:
(i) The internal aspect deals with the circulation of coins and currency notes,

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