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October 27, 2016

Banking Awareness 2016 in Simple Language - Lesson 16

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Dear Gr8 Ambitionists, in our previous Banking Awareness 2016 Lesson 15, we have learnt about the Plastic Money. In today's lesson, we shall learn about the Currency. Happy Reading :)

Banking Awareness 2016 : Currency

Indian Rupee Sign (

The Indian rupee sign is the currency sign for the Indian rupee, the official currency of India. Designed by D. Udaya Kumar, it was presented to the public by Government of India on 15 July 2010. Indian rupee symbol is combination of Devanagri 'र' and latin 'R'. India is 5th country to accept the currency sign. Design of Bank note is approved by Central Govt. of India.

Types of Currency

  • Hard Currency : [Safe heaven currency]. This currency is any globally traded currency that serves as a reliable and stable store of value [UK Pound, Sterling, Euro, U,S. dollar]. 
  • Soft Currency : It indicates a currency which is expected to fluctuate or depreciate against other currencies such softness is typically the result of political or fiscal instability within the associated country. 
  • Hot Money : In financial market, 'hot money' is the flow of funds from one country to another in order to earn a short term profit on interest rate differences and anticipated exchange rate shifts. These speculative capital flows are called 'hot money' because they can move very quickly in and out of markets, potentially leading to market instability. 
  • Cheap Money : A loan or credit with a low interest rate, or the setting of low interest rates by a central bank. It is good for borrower, but bad for investors, who will see the same low interest rates on investments like saving a/c, Money Market Funds, CDs & Bonds
  • Dear Money : A situation in which money or loans are very difficult to obtain in a given country. If, you have the opportunity to secure a loan, then interest rates are usually extremely high also known as "tight money". 
  • Fiat Money : It has been defined variously as : 
    • Any money declared by a govt. to be legal tender. 
    • State-issued money which is neither convertible by law to any other-thing, nor fixed in value in terms of any objective standard. 
    • Intrinsically valueless money used as money because of government decree. 
  • Token Money : It is the money whose face value exceeds its cost of production. Most modem coins used in circulation are token money, as are paper notes. 
  • Bullion coins : It describes contemporary precious metal coins minted by official agencies for investment purposes. Historically, most currency were in the form of bullion coins, silver and gold being most common metals. 
  • High Powered Money : It refers to monetary base which is controlled by centre govt. or Central Bank of Country (RBI). It is kept by public in form of cash and commercial banks in form of cash or vault cash.
  • Near Money : These are known as Non-cash assets are highly liquid i.e., bank deposits, Treasury bills. It can also be referred to assets that can be quickly converted into cash. 
    • Note : It is also called Quasi-money
  • Commodity Money : This type is used in barter system. In this type two parties exchange their commodity, then commodity becomes equivalent to money. It is called commodity money eg: Gold coins, stones, silver, copper. • Representative Money : It is not physical form of currency but represents the intent to pay immediately eg: Bank cheques, Gold, Silver, Copper etc. It is called Commodity Backed Money. 
  • Fiduciary Money : When any bank assures the customers to pay in different types of money and when the customer can sell the promise or transfer it to somebody else, it is called fiduciary money. Fiduciary money is generally paid in gold, silver & paper money. There are cheques and bank notes, which are the examples of fiduciary money because both are same kind of token which are used as money & carry the same value. 

Bank Note

A Bank note (often known as a bill, paper money or simply a note) is a type of negotiable instrument known as promissory note, made by a bank, payable to bearer or demand. 
  1. Soiled Note : It means a note which has become dirty due to usage and also includes a two piece posted together wherein both the pieces presented belong to same note and form the entire note.
  2. Mutilated Note : It is banknote of which a portion is missing or which is composed of more than two pieces. 
  3. Imperfect Banknote : It is note which is wholly or partially obliterated, shrunk, washed, altered or indecipherable but does not include a mutilated banknote. 
    • According to RBI (Note Refund) rules, 2009 : Counterfeit money is limitation currency produced without the legal sanction of the state or government producing or using counterfeit money is a form of fraud or forgery. 

Important Banking Awareness points about Indian Currency

Currency Note Presses :

  • Currency Note Press (1928) — Nasik (Maharashtra) : Denomination of Rs. 1 to 100. 
  • Bank Note Press (1978) - Dewar (MP): Denomination of Rs. : 20, 50, 100, 500, 1000. 
  • Modernized Currency Notes Press (1995) : Mysore in Karnataka, Salboni in West Bengal. 
  • Indian Security Press (1922) : Nasik : Printing of cheques, bonds, Indira Vikas Patra, Postal stamp, Judicial & Non judicial stamps etc. 
  • Bhartiya Reserve Bank Note Mudran Private Ltd. (BRBNMPL) [H.Q Bengaluru] was established by RBI as its wholly owned subsidiary on 3 Feb 1995 to enable the RBI to bridge the gap between the supply and demand for bank notes in the country. 
  • Security Printing Press (1982) —Hyderabad (Union excise duty stamps)

Minting of Coins

  • Minting of Coins : Kolkata & Mumbai (1829), Noida (1986), Hyderabad (1903)
  • India Govt. Mints are : 
    • Mumbai Mint : Below date of coin small dot or diamond 
    • Kolkata Mint : Has no mark beneath date 
    • Hyderabad Mint : 5 pointed star 
    • Noida Mint : Small or thick dot on coin. 
    • NOIDA was the first mint to mint coins of stainless steal
    • Coins below denomination of 50 paise ceased to be legal from 30 June 2011. Govt. issues a notification under sub-section 15 (A) of coinage Act 1906, announcing the date from which the coin would ceased to be legal tender. 
    • 50 Paise coins are still in circulation. They are called small coins while the other denominations are known as rupee coins. 
    • Coins are minted under section 6 of the coinage Act-2011 as per this act GOI can issue coins upto Denomination of Rs. 1000. 
    • Govt. of India has been charged with responsibility of production and supply of coins to RBI. 
    • 1 Rs. note or coin is issued by GOI and have signature of the Finance Secretary while other currency notes issued by RBI and have signature of RBI Governor.

Important Details about Currency

  • Security Paper Mill- Hoshangabad (M.P.) : Bank & currency note papers & watermark 
  • Banknote has 17 languages printed on it. 
  • RBI has planned to print plastic note of Rs. 10
  • The 1 rupee note was the first banknote printed by independent India. 
  • 10,000 Rs. is the highest denomination RBI has printed in its history (in 1938) and later RBI printed same notes in 1954.
    • They were demonetised in 1946 and 1978, respectively.
  • In 1861 GOI introduced its first paper money and 10 Rs. note in (1864), 5 Rs. (1872), 50 Rs. (1905), 100 Rs. (1900), 500 Rs. (1907), 1000 Rs. (1909). 
  • On 22nd October 2016, the Reserve Bank of India (RBI) has announced that it has completed preparations for introducing  ₹2,000 currency. It will be in circulation soon. 
    • The notes have already been printed, and their despatch from the currency printing press in Mysuru has commenced. 
  • Total notes (9) : 1, 5, 10, 20, 50, 100, 500, 1000, 2000
  • The Rs. 5 note was the first paper currency issued by RBI in January 1938. Within the same year notes of Rs 10, 100, 1000, 10,000 were issued. 
  • It costs a little over ₹3 to produce a ₹1,000 note, the lowest in terms printing costs as a proportion of value. 
    • Printing notes of smaller denominations is relatively more costly.
  • As of March 2016, the value of banknotes in circulation was ₹16,41,500 lakh crore, an increase of 14.9 per cent over the previous year.
  • In value terms, ₹500 and ₹1,000 notes together accounted for 86.4 per cent of the total value of notes in circulation.
  • Oldest currency symbol is (£) (Pound Sterling) 8 th AD century 
  • Rupee/currency symbol nations : Euro (£) , US Dollar ($), Japanese Yen (¥), British Pound (£), Indian rupee (₹). 
That's all for now friends. In our next Banking Awareness lesson, we shall learn about various Banking & Financial Institutes. Happy Reading :)
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