CHAPTER 7

Currency and Resource Arrangements

95. Introductory. In paragraph 92 a brief reference has been made to the Currency and Resource arrangements in India. This chapter is intended to deal in outline with the broad principles and general arrangements concerning these subjects.

96. Currency. The Currency of India consists of coins, of which the coin- age and issue are authorised under the Indian Coinage Act (Act III of 1906) as amended from time to time, of notes issued by the Government of India under the provisions of the Indian Paper Currency Act (Act X of 1923), as amended from time to time; of one rupee notes issued under the Currency Ordinance of 1940 (No. IV of 1940) and of bank notes issued by the Reserve Bank of India. Under the provisions of the Reserve Bank of India Act (Act 11 of 1934), the sole right to issue bank notes in India has been vested in the Reserve Bank with effect from the 1st April 1935 and the Government of India have ceased to issue currency notes. The Reserve Bank has taken over the liability for the currency notes issued by the Government of India which were in circulation on that date.

97. Under the Indian Coinage Act, 1906, the following coins in the anna- pie and decimal series have been issued:-

(i) Anna-pie series

(a) Silver-Rupee, half rupee, quarter rupee and one eighth rupee.

(b) Quaternary Alloy silver-rupee, half rupee and quarter rupee.

(c) Nickel-Rupee, half rupee and quarter rupee.

(d) Cupro-nickel-Four anna, two anna, one anna and half anna.

(e) Nickel-brass-Two anna, one anna and half anna.

(f) Copper and Bronze-Single pice, half pice and pie.

(ii) Decimal series

(a) Pure nickel-50 and 25 naye paise.

(b) Cupro-nickel-10, 5 and 2 naye paise.

(c) Copper and bronze Half pice and pie pieces.

The only coin in the decimal series which remains to be put into circula- tion is the 100 naye paise coin in pure nickel.

2. Silver coins issued on or before 10th March, 1940 are not legal tender. Of the remaining coins indicated above, the following have been withdrawn from circulation :-

(a) Nickel-brass-Two anna, one anna and half anna coins.

(b) Cupro-nickel-Two anna and half anna coins.

(c) Copper and bronze-Half pice and pie pieces.

The rupee is legal tender up to any amount; the half rupee for any sum not exceeding ten rupees and other coins for any sum not exceeding one rupee.

3. In the decimal system of coinage introduced on 1st April, 1957, under Section 14 of the Act, as inserted by Indian Coinage (Amendment) Act, 1955, the rupee remains the standard without any change in its value. It will be equivalent to 100 naye paise and the half rupee and the quarter rupee to 50 naye paise and 25 naye paise respectively. During the period of switch over from the old system to the new, which will have to be done in suitable stages, the anna-pie coins not already withdrawn from circulation will continue to be legal tender at the rate of sixteen annas, sixty four pice or one hundred and ninety two pies to hundred naye paise calculated in respect at any such single coin or number of such coins, tendered at one transaction, to the nearest paisa, half or less than half a naya paisa being ignored.

98. Deleted.

99. Bank notes issued by the Reserve Bank of India are of the denomina- tional values of two rupees, five rupees, ten rupees and one hundred rupees and are legal tender throughout India.

99-A. One rupee notes issued by the Government of India under the currency ordinance of 1940 (No. IV of 1940) are unlimited legal tender, and these notes are treated as rupees coin for all purposes of the Reserve Bank of India Act.

100. The form of currency which is demanded by the public has to be supplied; but, in view of the waste involved in the use of silver or other metal coin as currency, the use of notes is encouraged as far as possible.

101. Under Section 39 of the Reserve Bank of India Act, the Bank is required to issue rupee coin on demand in exchange for bank notes and cur- rency notes, and such exchanges are effected at the Bank’s offices of issue at Calcutta, Bombay, Madras, and Kanpur. No person has a legal claim to re- ceive cash for notes presented at a Government treasury; but in order to en- courage the use of notes, Government have issued orders that notes should be cashed freely at any Government treasury whenever possible. Treasury officers and branches and agencies of the Bank are required to see that a sufficient stock of rupees is kept with them to provide for exchanges of notes presented by the public.

102. Resource. The control of the Resource operations of the Govern- ment of India and of States, vests in the Reserve Bank of India. This work is conducted under control of the Bank by a number of Currency Officers each of whom is in charge of an Issue Department of the Bank and is res- ponsible for the work of one or more States within his jurisdiction.

103. The cash balance of each Government is made up to the balance in its account with the Reserve Bank of India and the balances at its treasuries and sub-treasuries situated at places where the cash business is not conducted by the Reserve Bank of India and its branches and agencies. At places where the cash business is conducted by the Bank, Government receipts are paid 5-2 Compt A.G./62into and all Government disbursements are made from the Bank, and the Bank is responsible for the distribution and maintenance of funds according to re- quirements at these places. This is arranged by Currency offices. Each Gov- ernment is responsible for keeping in its account at the Reserve Bank of India a sum sufficient to enable the Bank to meet the disbursements which the Bank has to make on its account at its various branches and agencies. At treasuries and sub-treasuries situated at places where there is no branch or agency of the Bank, Government holds the Treasury Officer responsible for keeping suffi- cient funds to meet all Government disbursements and for maintaining the balances as low as possible in order that money may not be locked up un- necessarily. The transfer of funds between such treasuries and sub-treasuries and the offices, branches and agencies of the Bank in such a way as to keep the balances in the Government account with the Bank, and at each treasury and sub-treasury, sufficient to meet all Government payments without unneces- sarily locking up funds is an important part of the resource work in India.

104. Funds in India. The Currency Officers are responsible for the distri- bution of funds within their jurisdiction. It is the duty of the Currency Officers to keep all the treasuries in their jurisdiction adequately supplied with all kinds of coin and notes and to arrange for the transfer of funds between treasu- ries and the Bank and for the remittance of notes and coin between treasuries and currency offices.

105. The transfer of funds between treasuries and sub-treasuries and branches and agencies of the Reserve Bank of India is effected for the most part through the medium of currency chests. These chests are maintained at treasuries and sub-treasuries to prevent the unnecessary locking up of funds in treasury balances and to facilitate the transfer of funds from and to such balances. Under the provisions of the Reserve Bank of India Act, the amount of currency and bank notes in circulation which constitute the liabilities of the Issue Department of the Bank, should not exceed the assets of that depart- ment held in gold, sterling securities, rupee coin and rupee securities. A por- tion of these assets is held in the various currency chests in the form of rupee coin. The notes held in these chests are treated as not “in circulation” and they pass into circulation only when they are transferred to the treasury balances. Assuming that there are no transactions elsewhere, the deposit of notes in a currency chest decrease the amount of notes in circulation and the deposit of rupees in chest increases the assets of the Issue Department of the Bank. A deposit of notes or coin in a currency chest thus enables the Bank to issue notes elsewhere up to the amount deposited without increasing the total amount of the notes in circulation. If, therefore, a transfer of funds from the treasury balance at A to the treasury balance at B is required, this can be effected at short notice and without the actual remittance of coin or notes by transfer of money from the treasury balance to the currency chest at A and transfer of the same amount from the currency chest to the treasury balance at B. A currency chest thus enables the treasury balance at a treasury or sub-treasury to be kept at a low figure as it is always possible to replenishthe balance quickly by a transfer of money from the currency chest. It also obviates the necessity for frequent remittances of coin and notes, as surplus funds can always be deposited into the currency chest and made available for use elsewhere pending a convenient occasion for remittance. The stock of notes and coin kept in currency chests varies according to the needs of the respective districts. Remittances are made periodically from currency chests to Currency offices and vice versa in order that the stocks may be maintained at the necessary figure.

106. The Reserve Bank of India provides facilities to the public for re- mittance of moneys from one place to another. These remittances are arranged for by the issue of Telegraphic transfers or Reserve Bank drafts to and from places where the Reserve Bank has its own offices or is represented by its Imperial Bank agencies. In order to provide similar facilities for the remit- tance of moneys from and to places where there is no office of the Reserve Bank or branch of the Imperial Bank and to discourage the remittance of notes through the post by the public, Telegraphic Transfers and Reserve Bank drafts are also issued by Government treasuries acting as “Treasury Agencies” of the Reserve Bank for the purpose.

107. Financing arrangements for transactions outside India. (a) High Commissioner for India in London Sterling Remittances are made through the Reserve Bank of India to place sufficient moneys in the hands of the High Commissioner for India to meet liabilities of the Union and State Governments. In regard to these transactions it is seen in audit that

(1) the calculations involved, in converting the sterling figures into Indian currency at the rate of exchange agreed, are correct; and

(2) the transactions are properly accounted for by the Bank and the classification is correct.

(b) India Supply Mission, Washington. The India Supply Mission is financed by the High Commissioner for India in London in lump sum ad- vances for both administrative and non-administrative expenditure on the authorisations issued by the Ministry of Works, Housing and Supply. De- tailed checking of the remittances and the linking of the credits in the India Supply Mission accounts with the debits received by the High Commissioner in London is the responsibility of the Pay and Accounts Officer, Ministry of Works, Housing and Supply, New Delhi. The Director of Audit, Food, Re- habilitation, Supply, Commerce, Steel and Mines will also exercise these checks in respect of transactions coming under his audit. The Director of Audit, Indian Accounts in the U.K. London would conduct a simple payment audit of these transactions. Director of Audit, Indian Accounts in U.S.A. however, would see that the investments of surplus funds have been profitably made with due regard to the ways and means position.

(c) Other Embassies etc. (i) Embassies and Missions located in Europe and Western Hemisphere. With a few exceptions, the High Commissioner for India in London shall finance their normal expenditure through the Bank of England direct without the intervention of the Accountant General, Central Revenues and pass on the debits to the Accountant General, Central Revenues through his Remittance Account vide also Article 231-D of Account Code Volume IV.

(ii) Missions Elsewhere. As stated in Article 231-D of Account Code Volume IV, these are placed in funds by the Accountant General, Central Re- venues through the Reserve Bank of India, New Delhi on the basis of quarterly estimates and periodical requests from the Government of India. The Minis- try of External Affairs in the case of Diplomatic Missions, and the Ministry of Commerce and Industry in the case of the trade sections which are not attached to the Missions are authorised to approach the Accountant General, Central Revenues quarterly in advance for the remittance of the amount required on the first day of the each month.