Role of RBI in coins in India
In terms of Section 22 of RBI is the sole authority for issue of currency in India including one rupee coins/notes. One rupeecoins/notes are issued by the Government of India but put into circulation throughRBI.
Current Paper Notes in Circulation
As of 10 November 2016, the current circulating banknotes are in denominations of Rs. 5,10,20,50 and 100 are of the Mahatma Gandhi Series, while the denominations of Rs. 50, 200, 500 and 2,000 are of the new Mahatma Gandhi New Series, and the denomination of Rs. 1 is of the Lion Capital Series.
Signature on currency notes
For the currency notes above the value of Rs 2 and onwards, the Indian rupee currency notes bear the signature of the governor of the Indian central bank, the Reserve Bank of India. The Indian central bank (RBI) cannot mint coins; it can issue currency notes only.
However, all Indian rupee notes are not issues and signed by the RBI governor
Proportional Reserve System and Minimum Reserve System
The relationship between note issue and its reserve backing is usually done on the basis of a reserve system by central banks across the world. The reserve system provides guidelines for the issue of new currencies.
In India, currencies are issued by the RBI with the backing of reserves comprised of gold and foreign exchange (foreign currencies). For the issue of currencies, the RBI follows Minimum Reserve System at present. The Minimum Reserve System (MRS) is followed from 1956 onwards.
Under the Minimum Reserve System, the RBI has to keep a minimum reserve of Rs 200 crore comprising of gold coin and gold bullion and foreign currencies. Out of the total Rs 200 crores, Rs115 crore should be in the form of gold coins or gold bullion. The purpose of shifting to MRS was to expand money supply to meet the needs of increasing transactions in the economy.
The minimum reserve is a token of confidence and doesn’t have any practical connection with amount new currencies issued by the RBI. Under the Minimum Reserve System, RBI can issue unlimited amount of currency by keeping the reserve. But RBI follows some principle or rule for issuing new currencies based upon economic growth and transaction needs of the people.
In Proportional Reserve System (PRS), certain proportion or percentage of the reserves has to maintained in the form of precious metals like Gold. The remaining part of the reserves is to be kept in specific assets such as Government Securities and Commercial Bills. Such a balance is maintained to give backing (support) to the total volume of currency notes issued by the apex central bank of a nation like FED in the USA, RBI in India, etc.
The proportion of precious metals in the reserves usually varies from 25% (e.g. Canada and Argentina) to 40% (e.g. Germany, USA, and India). The remaining proportion of the reserves must consist of approved securities that change from 75% (e.g. Canada and Argentina) to 60% (e.g. Germany, USA, and India). In other words, if Gold makes 25% of the reserves then Securities will make its 75%. Similarly, if Gold is about 40% of the reserves, then Securities will occupy its 60% and so on.
Currency chests are branches of selected banks authorised by the RBI to stock rupee notes and coins. The responsibility for managing the currency in circulation is vested in the RBI. The central bank advises the Centre on the number of notes to be printed, the currency denominations, security features and so on. The number of notes that need to be printed is determined using a statistical model that takes the pace of economic growth, rate of inflation and the replacement rate of soiled notes. The Government has, however, reserved the right to determine the amount of coins that have to be minted.
The RBI offices in various cities receive the notes from note presses and coins from the mints. These are sent to the currency chests and small coin depots from where they are distributed to bank branches. The RBI has set up over 4,075 currency chests all over the country. Besides these, there are around 3,746 bank branches that act as small coin depots to stock small coins.
First printing press in India for bank notes
Currency Note Press (CNP), Nasik, Maharashtra was established in 1928. It was the first printing press for bank notes in India.
Locations of Various Bank Note Press
Security Printing and Minting Corporation of India Limited (SPMCIL) is an Indian government-owned corporation that engages in the production of bank notes, coins, non–judicial stamps, postage stamps, and other government related documents for India.
The company was formed in 2006 as the result of corporatisation of security presses and mints functioning under the India Ministry of Finance. It contains nine units, which include four presses, four mints, and a paper mill. SPMCIL comprises four presses: Currency Note Press (CNP), Bank Note Press (BNP), India Security Press, and Security Printing Press.
CNP was established in 1928 as the first printing press for bank notes in India. Both CNP, located in Nashik, Maharashtra, BNP Mysore and BNP, located in Dewas, Madhya Pradesh, print Indian currency. Currency is also printed by Reserve Bank of India, along with two presses owned by Bharatiya Reserve Bank Note Mudran Private Limited. BNP also has an ink factory that produces ink for security printing.
SPMCIL comprises four mints: India Government Mint, Mumbai, India Government Mint, Kolkata, India Government Mint, Hyderabad, and India Government Mint, Noida. These mints produce coins, and medals and awards, as required by the Government of India.
Security Paper Mill was established in 1968 at Hoshangabad, Madhya Pradesh. It produces papers for banknotes and non–judicial stamps.
One Rupee Note and One Rupee coins are legal tenders for unlimited amounts. 50 Paisa coins are legal tender for any sum not above Rs. 10.
Star Series Notes
Some fresh banknote packets issued by the Reserve Bank may contain some notes having a *(star) in the number panel in the space between the prefix and the number. The bands of the packets containing the Star series number will clearly indicate the presence of such banknotes in the packets. These notes are issued to replace the defected printed notes at the printing press.
Languages on currency notes
The amount of a banknote is written on it in 17 languages out of 22 official languages of India.
Issue Department and Currency Departments of RBI
For the issue of currency notes and its circulation, the RBI has the Issue Department. It looks after the currency notes in circulation and maintains a minimum reserve needed to issue currencies. Department of Currency Management has the responsibility of administering the functions of currency management, a core function of the Reserve Bank in terms of the Reserve Bank of India Act, 1934.
The reserves comprise of gold and coring currencies to issue notes. The minimum reserve system was introduced in 1956 and it requires the RBI to keep a minimum reserve of Rs 200 crores comprising foreign currencies, gold coin and gold bullion. Out of this, Rs115 crore should be in the form of gold coins or gold bullion. This reserve is proposed as a token of confidence while printing currency and is not in proportion to the issue of currency value.
The Issue Department is permitted to issue notes only in exchange for notes of other denominations or against prescribed assets (foreign exchange and gold).