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How rupee gained currency over the years

December 25, 2004 17:55 IST

It was in late 1950s, India faced its first foreign exchange crisis. A string of stringent controls followed.

A separate series of notes for exclusive circulation in the Persian Gulf region were also printed to prevent export of notes from forex-starved India. Gulf countries -- Kuwait, Bahrain, Qatar and Trucial states (now United Arab Emirates) -- did not have currencies of their own then.

In those days, the Indian rupee was traditionally a widely circulated currency in the Persian Gulf. The fear was foreign currencies could flow to the Gulf region along with the Indian currency.

The Reserve Bank of India's monetary museum in Mumbai presents this and several other largely unknown facets of the history of currency and coinage right from ancient times.

Between 1959 and 1964, India even issued special currency notes for use in the Gulf region by Haj pilgrims from India. The special Rs 10 and Rs 100 notes had "HAJ" printed on the obverse. The serial numbers of these notes were also prefixed with "HA".

Use of Indian currency in the Gulf waned in the 1960s as the Gulf states gradually started issuing their own currencies. And along the way, printing of special Gulf and Haj currency notes also stopped.

Paper money is believed to have originated in China around the ninth century. On display at the museum are early nineteenth century notes issued by private banks and three presidency banks -- Bank of Bengal, Bank of Bombay and Bank of Madras. These banks were later merged to form imperial bank, now known as the State Bank of India.

Money, since its evolution from the barter system, has assumed various shapes and sizes, specific to the needs of the society. Some appear odd and quaint. The earliest documented coins of India are the silver punch-marked coins of the sixth century BC. They had an oblong though bent shape.

In China, money had assumed shapes attributable to tools like knives, ploughs, etc. In India, among the earliest issuers of coins, "cowrie" shells were used as small denomination money well into the early 20th century.

The advent of the Delhi sultanate saw an attempt to standardise coinage. The unit of account was consolidated and referred to as the tanka. This period was marked by considerable expansion of the money economy.

With the decline of the Mughal empire, numerous regional states emerged, prominent among them were the Marathas, the Sikhs and the states of Mysore, Awadh and Hyderabad. Several of these powers issued their own coins in the name of the Mughal emperor. By late 18th century, over a 100 types of rupee coins were in circulation.

The British, after they gained ascendancy by the 1830s, attempted standardisation through the Indian Coinage Act of 1835, with the rupee weighing 11.66 grams of 0.917 fineness silver and issued along European lines rather than the traditional designs. It was made the sole legal tender in British held India.

The dawn of modern banking witnessed promissory notes being issued by banks, which came to be known as bank notes. Bank of Bengal, Bank of Bombay and Bank of Madras also issued currency notes.

Bank of Madras would issue a Rs 3,000 note, while Bank of Bombay would carry sketch of the Town Hall. The government in 1923 had also issued Rs 10,000 notes.

India's geographical expanse had thrown up issues of management of currency across the region, and then came the concept of currency circles. Currency notes became legal tenders in the "home" circles.

Between 1903 and 1911, notes of Rs 5, 10, 50 and 100 were universalised. They were thus legally encashable outside the circle of issue. The function of issuing currency notes was taken over by RBI from the government in 1935.
BS Banking Bureau in Mumbai