Category All About Money

        Star series notes, in its simplest definition, are replacement notes for errors in printing.

         You may be aware that banknote production is a one complicated process which involves several steps. Let’s try to understand it with the example of a Rs 100 note. They are usually issued in bundles of Rs 100 notes and each note is placed in a sequential serial order. During the process of production, especially during numbering, there could be errors that disturb the continuity of the series. These notes are then replaced. This is where notes of the star series are used.

           Star series notes are inserted, replacing defective notes in a bundle that is arranged in a particular sequential order.

           They are printed with a star symbol in the numbering panel. For example 9AA*034801. There is a prefix of three characters before the symbol, as well as a six-digit serial number that follows. The series was introduced by the Reserve Bank in 2006.

           There are many countries in the world that use the ‘rupee’ as their currency. This includes Indonesia, Mauritius, Nepal, Pakistan, Seychelles and Sri Lanka, apart from our own India.

             It would however be wrong to say that they are all one and the same. The value and denominations of these ‘rupees’ are different in all these countries. They depend on the respective country’s economy, and monetary policy.

             The units of currencies too are different in each country. While Indian and Pakistani rupees me further divided into ‘paise’, the unit in the Maldives is ‘rufiyah’. In Sri Lanka, they are ‘cents’. A Nepalese rupee, on the other hand, is equal to 100 paisa or four sukas, or two mohors.

            But the rupee sign, given as ‘Rs’, is the same in Sri Lanka, Nepal, Pakistan and the Maldives. Till July 15th 2010 India too used this as the currency sign. 

       Ever noticed a small clause written on our banknotes? If you haven’t, take a close look at it. It is the promissory note, along with the signature of the RBI Governor.

         Let’s take an example. The promissory clause printed on the banknotes that read as ‘I promise to pay the bearer the sum of one hundred Rupees’ means that the banknote with you is a legal tender for the given amount. It is also the promise made by the Governor of the central bank.

            The clause acts as a written guarantee made by the bank regarding the genuineness of note, and its value. It is invariably seen on all banknotes printed in the country. 

           Although money lending and other kinds of informal transactions existed during ancient and medieval times, banking in its modern sense originated in India only in the last decades of the 18th century.

           It was the Bank of Hindustan that marked a beginning to the banking trend in 1770. The General Bank of India came later, in 1786, but it failed within five years. The Bank of Hindustan too closed down between 1829 – 32.

           In spite of the initial failure, banking in the country flourished after the establishment of the three powerful banks -the Bank of Bengal in 1806, the Bank of Bombay in 1840, and the Bank of Madras in 1843. These were the Presidency banks that later merged to form the Imperial Bank of India in 1921.

           Upon the Independence, it was subsequently transformed into the State Bank of India that we now have, the oldest and the largest bank in the country.

Continue reading “Why is it said that banking in the modern sense developed in India in the 18th century?”

         The Reserve Bank of India was founded on April 1, 1935, constituted under the Reserve Bank of India Act 1934. It was a shareholder’s bank then, and remained so until its nationalization in 1949. It has been fully owned by the Indian government ever since.

         It was the financial troubles caused by the First World War that led to the establishment of the Reserve Bank. It is believed that the British were forced to transfer the responsibility of central banking to Indian hands, due to financial, as well as political reasons.

          The main idea behind the formation of the bank was to make it a regulatory body to issue banknotes, and to secure the country’s monetary stability. It also operated the currency and credit system, and still continues to do it.

           The bank was established on the recommendation of the Hilton-Young Commission. The first logo of the bank was inspired from the East India Company’s double mohur.

           Did you know that the bank was also the currency issuing body for countries like Burma and Pakistan? Till 1942, the Reserve Bank issued currencies to Burma, today’s Myanmar. It was also the banker to the Government of Burma till 1947. The following year, in 1948, the RBI stopped rendering currency notes to Pakistan too. 

          The Reserve Bank of India has the sole right to produce currency notes of all denominations in the country. Other than this, it has many other functions.

          The RBI is responsible for formulating, implementing, and monitoring the monetary policies in the country. It also means that the bank takes care of maintaining price stability within the country.

          Acting as a governmental agent, the RBI distributes coins all over the country. It is also known as a ‘banker’s bank’, as it provides aid to all other banks functioning in the country. Every bank has to have a license from the RBI for operating within the country.

          The RBI performs me-chant banking functions for the central and state governments, and manages the country’s foreign exchange too.

           The bank is also responsible for exchanging and destroying currency notes that are unfit for circulation. These are just some of the functions of the RBI.