Evolution of Paper Money

The commerce and trade was in vogue by barter system in the ancient days. As the civilization of mankind progressed the system of exchange of goods was discontinued as the time elapsed. The metal tokens followed by coins came into existence which last for a longer time for economic transactions. The paper currency evolved in the 10th Century in China.

However, the paper money has a venerable history in India. It has its traces of origin in the 18th Century when the bank of Hindustan in the year 1770 issued paper money. Subsequently general bank of Bengal and Bihar issued promissory notes which survived for a short period only. Later on with the establishment of semi Govt. banks in 19th century issued paper money. In 1861 the paper currency act was enacted by India Govt. and conferred the monopoly of the notes issues to Govt. of India and in the course of time, paper currency was managed by the office of the controller of currency during British era. The management of paper currency across the geographical expanse of Indian sub continent was a task of considerable proportion. In 1861 the act authorizes this task to presidency banks of the country having their various circle offices across the country. As the magnitude of the notes increased both in terms of value and volume the paper currency was made independent.

It was continued till 1st April 1935 when RBI was established as the central bank of country and RBI took over the function of bank notes. The notes issued by RBI were termed as bank notes. The notes issued by Govt of India through RBI offices were termed as Currency notes. The value of notes issued by RBI in the year 1935 amounted to Rs.186 Crs. Whereas the value of notes issued by RBI in the year 2000 amounted to Rs.207912 Crs.

The first set of British India notes are referred to as the “Victoria Portrait Series” issued in the denomination of Rs.10/-, 20/-,50/-,100/- these were unifaced, carried two language panels and were printed on hand molded paper manufactured in England. The security features were watermark, printed signature and registration. These notes were printed in England by Thomas De La Rue which continued till 1928.

Promises to Pay

The early paper money represented a stage where physical coins possessing intrinsic / token value were replaced by “Promises to Pay” the physical equivalent or the under lying value. Later the paper money converted to fiat money where it does not represent any underlying equivalent but is a token in itself. The promissory clause was shortened and the provision of name was dropped and amended as “ I Promise to Pay the Bearer on Demand _________”

Establishment of Currency Press in India

Currency and Bank notes are one of the most mass produced commodities in the world. In 1922 pursuant to the demands made by the Indian merchant chambers and bureau to the Indian currency committee the task of setting up of the security press was entrusted to the Lt.Col. G.H. Wills Master Bombay mint and Mr. F.D. Ascoli controller of Printing and Stationary. Thus the security press was set up in the year 1925 and currency note press was set up in the year 1928 in Nashik (Maharashtra). With the establishment of Currency Note Press at Nashik in 1928 currency notes came to be progressively printed in India. By 1932 CNP was printing the entire spectrum of Indian Currency Notes.