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Unit 9: Indian Currency System

pieces (paisa) per rupee. Amongst the first issues of paper rupees were those by the Bank of Notes
Hindostan (1770-1832), the General Bank of Bengal and Bihar (1773-75, established by Warren
Hastings), the Bengal Bank (1784-91), amongst others.
Traditionally, the rupee, a Sanskrit term which means silver, was a silver coin. This had severe
th
concerns in the 19 century, when the toughest economies in the world were on the gold standard.
The discovery of vast quantities of silver in the U.S. and a number of European colonies resulted
in a weakening in the qualified value of silver to gold. Unexpectedly the normal currency of
India could not buy as much from the exterior world. This occasion was known as “the fall of the
Rupee.”

In course of the British rule, and the first period of independence, it was divided into 16 Annas.
Each Anna was sub-divided into either 4 paise, or 12 pies. Till 1815, the Madras Presidency also
allotted a currency grounded on the fanam, with 12 fanams equivalent to the rupee.
It is important to know that resulting independence in 1947, the Indian rupee substituted all the
moneys of the before independent states. Some of these states had delivered rupees equal to
those delivered by the British (such as the Travancore rupee). Other currencies comprised the
Hyderabad rupee and the Kutch kori.

In 1957, decimalisation occurred and the rupee was nowadays divided into 100 Naye Paise
(Hindi for new paisas). After a few years, the first “Naye” was released. However, many still
refer to 25, 50 & 75 paise as 4, 8 and 12 annas correspondingly, not unlike the now mainly defunct
practice of “bit” in American English for 1/8 dollar.

Notes The Reserve Bank of India (RBI) is India’s central banking institution, which controls
the monetary policy of the Indian rupee.

9.2.3 International Use

Now you must understand that with Partition, the Pakistani Rupee originated into being,
originally by means of Indian coins, and Indian currency notes merely over stamped with
Pakistan. In previous times, the Indian Rupee was observed as an authorised currency of other
countries, comprising Kuwait, Bahrain, Qatar, the Trucial States (now the UAE), and Malaysia.
The Gulf Rupee, also recognized as the Persian Gulf Rupee (XPGR), was introduced by the Indian
government as a standby for the Indian Rupee for flow entirely outside the country with the
Reserve Bank of India [Amendment] Act, May 1, 1959. This creation of a dispersed currency was
a challenge to decrease the straining put on India’s foreign reserves by gold smuggling. After
India devaluated the rupee on June 6, 1966, those countries still using it - Oman, Qatar and what
is now the United Arab Emirates (referred to as the Trucial States until 1971) – substituted the
Gulf Rupee with their individual currencies. Kuwait and Bahrain had previously done so in 1961
and 1965 respectively.
The Indian Rupee is also connected with the Bhutanese Ngultrum. The Indian Rupee is also
recognised in Nepal and some Indian shops in the United Kingdom. The currency notes in flow
are ` 5, ` 10, ` 20, ` 50, ` 100, ` 500 and ` 1000. The current series which began in 1996 is referred
to as the Mahatma Gandhi series.
All the coins and currency notes are delivered by the Reserve Bank of India, with the exception
of the ` 1 note which was conventionally give out by the Government of India till it was
reserved from circulation. Each banknote has its amount written in seventeen languages (English
& Hindi on the front, and 15 others on the back) illustrating the diversity of the country.

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