The Indian rupee (sign: INR ; code: INR), is the official currency of the Republic of India. The rupee is subdivided into 100 paise (singular paisa), though as of 2011, coins of denomination 25 paise and less are no longer legal tender. The issuance of the currency is controlled by the Reserve Bank of India. The Reserve Bank manages currency in India and derives its role in currency management on the basis of the Reserve Bank of India Act, 1934. The rupee is named after the silver coin, rupiya, first issued by Sultan Sher Shah Suri in the 16th century and later continued by the Mughal Empire.
In 2010, a new symbol 'INR', was officially adopted. It was derived from the combination of the Devanagari consonant "?" (ra) and the Latin capital letter "R" without its vertical bar (similar to the R rotunda). The parallel lines at the top (with white space between them) are said to make an allusion to the tricolour Indian flag, and also depict an equality sign that symbolises the nation's desire to reduce economic disparity. The first series of coins with the new rupee symbol started in circulation on 8 July 2011.
On 8 November 2016 the Government of India announced the demonetisation of INR500 and INR1000 banknotes with effect from midnight of the same day, making these notes invalid. A newly redesigned series of INR500 banknote, in addition to a new denomination of INR2000 banknote is in circulation since 10 November 2016. The new redesigned series is also expected to be enlarged with banknotes in the denominations of INR1000, INR100 and INR50 in the coming months.
On 25 August 2017, a new denomination of INR200 banknote was added to Indian currency to fill the gap of notes due to high demand for this note after demonetisation.
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Etymology
The word "rupee" was derived from the Sanskrit word (r?pyakam) or rupaya (meaning "wrought silver, a coin of silver"). Arthashastra, written by Chanakya, prime minister to the first Maurya emperor Chandragupta Maurya (c 340-290 BCE), mentions silver coins as r?pyarupa, other types of coins including gold coins (Suvar?ar?pa), copper coins (T?mrar?pa) and lead coins (S?sar?pa) are also mentioned. R?pa means to form or shape, example, R?pyar?pa, r?pya -- wrought silver, r?pa -- form.
However, in the region of Bengal, the term taka has always been used to refer to currency. In the 14th century, Ibn Battuta noticed that people in the Bengal Sultanate referred to gold and silver coins as taka instead of the dinar. Today, the currency of Bangladesh is officially known as taka. The word taka in Bengali is also commonly used generically to mean any money, currency, or notes. Thus, colloquially, a person speaking in Bengali may use "taka" to refer to money regardless of what currency it is denominated in. Thus, in the states of West Bengal and Tripura the Indian rupee is officially known ???? (?aka). Whereas, in the states of Assam and Odisha, the Indian rupee is similarly known by names derived from the Sanskrit word ?a?ka (meaning "money"), ??? (?ôka) in Assamese and ????? (ta?k?) in Odia.
Large values of rupees are counted in terms of thousands, 1 lakh (100 thousand), 10 lakhs (1 million), 1 crore (10 million) and 100 crores (1 billion) or 1 Arab (1 billion).
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History
The history of the Indian rupee traces back to Ancient India in circa 6th century BCE, ancient India was one of the earliest issuers of coins in the world, along with the Chinese wen and Lydian staters.
During his five-year rule from 1540 to 1545, Sultan Sher Shah Suri issued a coin of silver, weighing 178 grains (or 11.53 grams), which was termed the Rupiya. During Babar's time, the brass to silver exchange ratio was roughly 50:2. The silver coin remained in use during the Mughal period, Maratha era as well as in British India. Among the earliest issues of paper rupees include; the Bank of Hindustan (1770-1832), the General Bank of Bengal and Bihar (1773-75, established by Warren Hastings), and the Bengal Bank (1784-91).
1800s
Historically, the rupee was a silver coin. This had severe consequences in the nineteenth century when the strongest economies in the world were on the gold standard. The discovery of large quantities of silver in the United States and several European colonies resulted in a decline in the value of silver relative to gold, devaluing India's standard currency. This event was known as "the fall of the rupee."
India was unaffected by the imperial order-in-council of 1825, which attempted to introduce British sterling coinage to the British colonies. British India, at that time, was controlled by the British East India Company. The silver rupee continued as the currency of India through the British Raj and beyond. In 1835, British India adopted a mono-metallic silver standard based on the rupee; this decision was influenced by a letter written by Lord Liverpool in 1805 extolling the virtues of mono-metallism.
Following the Indian Mutiny in 1857, the British government took direct control of British India. Since 1851, gold sovereigns were produced en masse at the Royal Mint in Sydney, New South Wales. In an 1864 attempt to make the British gold sovereign the "imperial coin", the treasuries in Bombay and Calcutta were instructed to receive gold sovereigns; however, these gold sovereigns never left the vaults. As the British government gave up hope of replacing the rupee in India with the pound sterling, it realised for the same reason it could not replace the silver dollar in the Straits Settlements with the Indian rupee (as the British East India Company had desired). Since the silver crisis of 1873, a number of nations adopted the gold standard; however, India remained on the silver standard until it was replaced by a basket of commodities and currencies in the late 20th century.
India Council Bill
Around 1875, Britain started paying India for exported goods in India Council Bills (instead of silver).
1900s
Problems caused by the gold standard
At the onset of the First World War, the cost of gold was very low and therefore the pound sterling had high value. But during the First World War, the value of the pound fell alarmingly due to rising war expenses. At the conclusion of the war, the value of the pound was only a fraction of what it used to be prior to the commencement of the war. It remained low until 1925, when the then Chancellor of the Exchequer (finance minister) of the United Kingdom, Winston Churchill, restored it to pre-War levels. As a result, the price of gold fell rapidly. While the rest of Europe purchased large quantities of gold from the United Kingdom, there was little increase in her gold reserves. This dealt a blow to an already deteriorating British economy. The United Kingdom began to look to its possessions as India to compensate for the gold that was sold.
In 1939, Dickson H. Leavens wrote in his book 'Silver Money': "In recent years the increased price of gold, measured in depreciated paper currencies, has attracted to the market (of London) large quantities (of gold) formerly hoarded or held in the form of ornaments in India and China".
The Indian rupee replaced the Danish Indian rupee in 1845, the French Indian rupee in 1954 and the Portuguese Indian escudo in 1961. Following the independence of British India in 1947 and the accession of the princely states to the new Union, the Indian rupee replaced all the currencies of the previously autonomous states (although the Hyderabadi rupee was not demonetised until 1959). Some of the states had issued rupees equal to those issued by the British (such as the Travancore rupee). Other currencies (including the Hyderabadi rupee and the Kutch kori) had different values.
The values of the subdivisions of the rupee during British rule (and in the first decade of independence) were:
- 1 rupee = 16 anna (later 100 naye paise)
- 1 ardharupee = 8 anna, or 1/2 rupee (later 50 naye paise)
- 1 pavala = 4 anna, or 1/4 rupee (later 25 naye paise)
- 1 beda = 2 anna, or 1/8 rupee (later equivalent to 12.5 naye paise)
- 1 anna = 1/16 rupee (later equivalent to 6.25 naye paise)
- 1 paraka = 1/2 anna (later equivalent to 3.125 naye paise)
- 1 kani (pice) = 1/4 anna (later equivalent to 1.5625 naye paise)
- 1 damari (pie) = 1/12 anna (later equivalent to 0.520833 naye paise)
- 1 rupee = 16 anna
- 1 Athanni (dheli) = 1/2 rupee
- 1 Chawanni = 1/4 rupee
- 1 Dawanni = 1/8 rupee
- 1 Anna/Ekanni = 1/16 rupee
- 1 Taka/Adhanni = 1/32 rupee
- Paisa = 1/64 rupee
- Dhela = 1/128 rupee (1/2 paisa)
- Pie = 1/3 paisa = 1/192 rupee
- Damari = 1/4 paisa = 1/256 rupee.
In 1957, the rupee was decimalised and divided into 100 naye paise (Hindi for "new paise"); in 1964, the initial "naye" was dropped. Many still refer to 25, 50 and 75 paise as 4, 8 and 12 annas respectively, similar to the usage of "two bits" in American English for a quarter-dollar.
Worldwide RUPEE Usage
As the Straits Settlements were originally an outpost of the British East India Company, In 1837, the Indian rupee was made the sole official currency in the Straits Settlements, as it was administered as part of British India. This attempt was resisted by the locals. However, Spanish dollars continued to circulate and 1845 saw the introduction of coinage for the Straits Settlements using a system of 100 cents = 1 dollar, with the dollar equal to the Spanish dollar or Mexican peso. In 1867, administration of the Straits Settlements was separated from India and the Straits dollar was made the standard currency, and attempts to reintroduce the rupee were finally abandoned.
After the Partition of India, the Pakistani rupee came into existence, initially using Indian coins and Indian currency notes simply overstamped with "Pakistan". Previously the Indian rupee was an official currency of other countries, including Aden, Oman, Dubai, Kuwait, Bahrain, Qatar, the Trucial States, Kenya, Tanganyika, Uganda, the Seychelles and Mauritius.
The Indian government introduced the Gulf rupee - also known as the Persian Gulf rupee (XPGR) - as a replacement for the Indian rupee for circulation outside the country with the Reserve Bank of India (Amendment) Act of 1 May 1959. The creation of a separate currency was an attempt to reduce the strain on India's foreign reserves from gold smuggling. After India devalued the rupee on 6 June 1966, those countries still using it - Oman, Qatar, and the Trucial States (which became the United Arab Emirates in 1971) - replaced the Gulf rupee with their own currencies. Kuwait and Bahrain had already done so in 1961 with Kuwaiti dinar and in 1965 with Bahraini dinar, respectively.
The Bhutanese ngultrum is pegged at par with the Indian rupee; both currencies are accepted in Bhutan. The Nepalese rupee is pegged at INR0.625; the Indian rupee is accepted in Bhutan and Nepal, except INR500 and INR1000 banknotes, which are not legal tender in Bhutan and Nepal and are banned by their respective governments, though accepted by many retailers. On 29 January 2014, Zimbabwe added the Indian rupee as a legal tender to be used.
Coins
Pre-independence issues
East India Company, 1835
The three Presidencies established by the British East India Company (Bengal, Bombay and Madras) each issued their own coinages until 1835. All three issued rupees and fractions thereof down to 1/8- and 1/16-rupee in silver. Madras also issued two-rupee coins.
Copper denominations were more varied. Bengal issued one-pie, 1/2-, one- and two-paise coins. Bombay issued 1-pie, 1/4-, 1/2-, 1-, 11/2-, 2- and 4-paise coins. In Madras there were copper coins for two and four pies and one, two and four paisa, with the first two denominated as 1/2 and one dub (or 1/96 and 1/48) rupee. Madras also issued the Madras fanam until 1815.
All three Presidencies issued gold mohurs and fractions of mohurs including 1/16, 1/2, 1/4 in Bengal, 1/15 (a gold rupee) and 1/3 (pancia) in Bombay and 1/4, 1/3 and 1/2 in Madras.
In 1835, a single coinage for the EIC was introduced. It consisted of copper 1/12, 1/4 and 1/2 anna, silver 1/4, 1/3 and 1 rupee and gold 1 and 2 mohurs. In 1841, silver 2 annas were added, followed by copper 1/2 pice in 1853. The coinage of the EIC continued to be issued until 1862, even after the Company had been taken over by the Crown.
Regal issues, 1862-1947
In 1862, coins were introduced (known as "regal issues") which bore the portrait of Queen Victoria and the designation "India". Their denominations were 1/12 anna, 1/2 pice, 1/4 and 1/2 anna (all in copper), 2 annas, 1/4, 1/2 and one rupee (silver), and five and ten rupees and one mohur (gold). The gold denominations ceased production in 1891, and no 1/2-anna coins were issued after 1877.
In 1906, bronze replaced copper for the lowest three denominations; in 1907, a cupro-nickel one-anna coin was introduced. In 1918-1919 cupro-nickel two-, four- and eight-annas were introduced, although the four- and eight-annas coins were only issued until 1921 and did not replace their silver equivalents. In 1918, the Bombay mint also struck gold sovereigns and 15-rupee coins identical in size to the sovereigns as an emergency measure during the First World War.
In the early 1940s, several changes were implemented. The 1/12 anna and 1/2 pice ceased production, the 1/4 anna was changed to a bronze, holed coin, cupro-nickel and nickel-brass 1/2-anna coins were introduced, nickel-brass was used to produce some one- and two-annas coins, and the silver composition was reduced from 91.7 to 50 percent. The last of the regal issues were cupro-nickel 1/4-, 1/2- and one-rupee pieces minted in 1946 and 1947, bearing the image of George VI, King and Emperor on the obverse and an Indian Lion on the reverse.
Post independence issues
Independent predecimal issues, 1950-1957
India's first coins after independence were issued in 1950 in 1 pice, 1/2, one and two annas, 1/4, 1/2 and one-rupee denominations. The sizes and composition were the same as the final regal issues, except for the one-pice (which was bronze, but not holed).
Independent decimal issues, 1957-present
The first decimal-coin issues in India consisted of 1, 2, 5, 10, 25 and 50 naye paise, and 1 rupee. The 1 naya paisa was bronze; the 2, 5 & 10 naye paise were cupro-nickel, and the 25 naye paise (nicknamed chawanni; 25 naye paise equals 4 annas), 50 naye paise (also called athanni; 50 naye paise equalled 8 old annas) and 1-rupee coins were nickel. In 1964, the word naya(e) was removed from all coins. Between 1957 and 1967, aluminium one-, two-, three-, five- and ten-paise coins were introduced. In 1968 nickel-brass 20-paise coins were introduced, and replaced by aluminium coins in 1982. Between 1972 and 1975, cupro-nickel replaced nickel in the 25- and 50-paise and the 1-rupee coins; in 1982, cupro-nickel two-rupee coins were introduced. In 1988 stainless steel 10-, 25- and 50-paise coins were introduced, followed by 1- and 5-rupee coins in 1992. Five-rupee coins, made from brass, are being minted by the Reserve Bank of India (RBI).
Between 2005 and 2008 new, lighter fifty-paise, one-, two- and five-rupee coins were introduced, made from ferritic stainless steel. The move was prompted by the melting-down of older coins, whose face value was less than their scrap value. The demonetisation of the 25-(chawanni) paise coin and all paise coins below it took place, and a new series of coins (50 paise - nicknamed athanni - one, two, five and ten rupees, with the new rupee symbol) were put into circulation in 2011. Coins commonly in circulation are one, two, five and ten rupees. Although it is still legal tender, the 50-paise (athanni) coin is rarely seen in circulation.
The coins are minted at the four locations of the India Government Mint. The INR1, INR2, and INR5 coins have been minted since independence. Coins minted with the "hand picture" were minted from 2005 onwards.
Minting
The Government of India has the only right to mint the coins and one rupee note. The responsibility for coinage comes under the Coinage Act, 1906 which is amended from time to time. The designing and minting of coins in various denominations is also the responsibility of the Government of India. Coins are minted at the five India Government Mints at Mumbai, Alipore (Kolkata), Saifabad (Hyderabad), Cherlapally (Hyderabad) and NOIDA (UP). The coins are issued for circulation only through the Reserve Bank in terms of the RBI Act.
Commemorative coins
After independence, the Government of India mint, minted coins imprinted with Indian statesmen, historical and religious figures. In the years 2010 and 2011 for the first time ever INR75, INR150 and INR1000 coins were minted in India to commemorate the Platinum Jubilee of the Reserve Bank of India, the 150th birth anniversary of the birth of Rabindranath Tagore and 1000 years of the Brihadeeswarar Temple, respectively. In 2012 a INR60 coin was also issued to commemorate 60 years of the Government of India Mint, Kolkata. INR100 coin was also released commemorating the 100th anniversary of Mahatma Gandhi's return to India. Commemorative coins of INR125 were released on 4 September 2015 and 6 December 2015 to honour the 125th anniversary of the births of Sarvepalli Radhakrishnan and B. R. Ambedkar, respectively.
Banknotes
Pre independence issues
In 1861, the government of India introduced its first paper money: INR10 note in 1864, INR5 note in 1872, INR10,000 note in 1899, INR100 note in 1900, INR50 note in 1905, INR500 note in 1907 and INR1,000 note in 1909. In 1917, INR1 and INR21/2 notes were introduced. The Reserve Bank of India began banknote production in 1938, issuing INR2, INR5, INR10, INR50, INR100, INR1,000 and INR10,000 notes while the government continued issuing INR1 note but demonetized the INR500 and INR21/2 notes.
Post independence issues
After independence, new designs were introduced to replace the portrait of George VI. The government continued issuing the INR1 note, while the Reserve Bank issued other denominations (including the INR5,000 and INR10,000 notes introduced in 1949). All pre-independence banknotes were officially demonetised with effect from 28 April 1957.
During the 1970s, INR20 and INR50 notes were introduced; denominations higher than INR100 were demonetised in 1978. In 1987, the INR500 note was introduced, followed by the INR1,000 note in 2000 while INR1 and INR2 notes were discontinued in 1995.
The design of banknotes is approved by the central government, on the recommendation of the central board of the Reserve Bank of India. Currency notes are printed at the Currency Note Press in Nashik, the Bank Note Press in Dewas, the Bharatiya Reserve Bank Note Mudran (P) Ltd at Salboni and Mysore and at the Watermark Paper Manufacturing Mill in Hoshangabad. The Mahatma Gandhi Series of banknotes are issued by the Reserve Bank of India as legal tender. The series is so named because the obverse of each note features a portrait of Mahatma Gandhi. Since its introduction in 1996, this series has replaced all issued banknotes of the Lion capital series. The RBI introduced the series in 1996 with INR10 and INR500 banknotes. At present, the RBI issues banknotes in denominations from INR5 to INR2,000. The printing of INR5 notes (which had stopped earlier) resumed in 2009.
As of January 2012, the new 'INR' sign has been incorporated into banknotes of the Mahatma Gandhi Series in denominations of INR10, INR20, INR50, INR100, INR500 and INR1,000. In January 2014 RBI announced that it would be withdrawing from circulation all currency notes printed prior to 2005 by 31 March 2014. The deadline was later extended to 1 January 2015. The dead line was further extended to 30 June 2016.
There had been discussions on the necessity to withdraw notes of higher denominations such as the INR1000 and INR500 banknotes, considering their role in perpetuating unaccounted money. This move was taken to further curb the problem of fake currency circulation. While noting that the withdrawal of high denomination notes can lead to an increase in printing costs for RBI, there was an opinion that these costs should be weighed against the misuse of high-value notes. On 8 November 2016 Prime Minister Narendra Modi announced the demonetization of INR500 and INR1,000 banknotes of the Mahatma Gandhi Series, with a detailed step-down program. This program would stop all usage of INR500 and INR1,000 rupee notes by 11 November 2016. Citizens with valid identification will have until 30 December 2016 to exchange the notes for lower tender at any bank or post office, and until 31 March 2017 to exchange them at designated RBI offices by filling in a declaration form.
On 8 November 2016, the Reserve Bank of India (RBI) announced the issuance of new INR500 and INR2,000 banknotes in the Mahatma Gandhi New Series of banknotes. The new INR2,000 banknote has a magenta base colour, with a portrait of Mahatma Gandhi as well as the Ashoka Pillar Emblem on the front. The denomination also has a motif of the Mars Orbiter Mission (MOM) on the back, depicting the country's first venture into interplanetary space. The new INR500 banknote has a stone grey base colour with an image of the Red Fort along with the Indian flag printed on the back. Both the banknotes also have the Swachh Bharat Abhiyan logo printed on the back. The banknote denominations of INR200, INR100 and INR50 are also expected to be introduced in the new Mahatma Gandhi New Series, in the coming months, intended to replace all banknotes of the previous Mahatma Gandhi Series. On 13 June 2017, RBI introduced new INR50 notes, but the old ones continue being legal tender. The design is similar to the current notes in the Mahatma Gandhi (New) Series, except they will come with an inset 'A'.
Current circulating banknotes
As of 24 August 2017, the current circulating banknotes are in denominations of INR5, INR10, INR20, INR50 and INR100 are of the Mahatma Gandhi Series, while the denominations of INR50, INR200, INR500 and INR2,000 are of the new Mahatma Gandhi New Series, and the denomination of INR1 is of the Lion Capital Series.
Convertibility
Officially, the Indian rupee has a market-determined exchange rate. However, the RBI trades actively in the USD/INR currency market to impact effective exchange rates. Thus, the currency regime in place for the Indian rupee with respect to the US dollar is a de facto controlled exchange rate. This is sometimes called a "managed float". Other rates (such as the EUR/INR and INR/JPY) have the volatility typical of floating exchange rates, and often create persistent arbitrage opportunities against the RBI. Unlike China, successive administrations (through RBI, the central bank) have not followed a policy of pegging the INR to a specific foreign currency at a particular exchange rate. RBI intervention in currency markets is solely to ensure low volatility in exchange rates, and not to influence the rate (or direction) of the Indian rupee in relation to other currencies.
Also affecting convertibility is a series of customs regulations restricting the import and export of rupees. Legally, only up to INR25000 can be imported or exported in cash at a time, and the possession of INR500 and higher notes in Nepal is prohibited. The conversion of currencies for and from rupees is also regulated.
RBI also exercises a system of capital controls in addition to (through active trading) in currency markets. On the current account, there are no currency-conversion restrictions hindering buying or selling foreign exchange (although trade barriers exist). On the capital account, foreign institutional investors have convertibility to bring money into and out of the country and buy securities (subject to quantitative restrictions). Local firms are able to take capital out of the country in order to expand globally. However, local households are restricted in their ability to diversify globally. Because of the expansion of the current and capital accounts, India is increasingly moving towards full de facto convertibility.
There is some confusion regarding the interchange of the currency with gold, but the system that India follows is that money cannot be exchanged for gold under any circumstances due to gold's lack of liquidity; therefore, money cannot be changed into gold by the RBI. India follows the same principle as Great Britain and the US.
Reserve Bank of India clarifies its position regarding the promissory clause printed on each banknote:
"As per Section 26 of Reserve Bank of India Act, 1934, the Bank is liable to pay the value of banknote. This is payable on demand by RBI, being the issuer. The Bank's obligation to pay the value of banknote does not arise out of a contract but out of statutory provisions.The promissory clause printed on the banknotes i.e., "I promise to pay the bearer an amount of X" is a statement which means that the banknote is a legal tender for X amount. The obligation on the part of the Bank is to exchange a banknote for coins of an equivalent amount."
Chronology
- 1991 - India began to lift restrictions on its currency. A number of reforms removed restrictions on current account transactions (including trade, interest payments and remittances and some capital asset-based transactions). Liberalised Exchange Rate Management System (LERMS) (a dual-exchange-rate system) introduced partial convertibility of the rupee in March 1992.
- 1997 - A panel (set up to explore capital account convertibility) recommended that India move towards full convertibility by 2000, but the timetable was abandoned in the wake of the 1997-1998 East Asian financial crisis.
- 2006 - Prime Minister Manmohan Singh asked the Finance Minister and the Reserve Bank of India to prepare a road map for moving towards capital account convertibility.
- On 8 November 2016, the Government of India announced the demonetisation of all INR500 (US$7.80) and INR1,000 (US$16) banknotes of the Mahatma Gandhi Series. The government claimed that the action would curtail the shadow economy and crack down on the use of illicit and counterfeit cash to fund illegal activity and terrorism.
Exchange rates
Historic exchange rates
For almost a century since the Great Recoinage of 1816 until the outbreak of World War I, the Indian rupee sustained parity with the US dollar while pegged to the pound sterling that was exchanged at INR4 12a 10ps (or 50 old pence per rupee). Effectively, the rupee bought 1s 4d (or INR15 per sterling) during 1899-1914. The gold silver ratio expanded during 1870-1910. Unlike India, her colonial master Britain was on gold standard. To meet the Home Charges (i.e., expenditure in England) the colonial government had to remit a larger number of rupees and this necessitated increased taxation, unrest and nationalism.
Thereafter, both the rupee and the sterling gradually declined in worth against the US dollar due to deficits in trade, capital and budget. In 1966, the rupee was devalued and pegged to the dollar. The peg to the pound was at INR13.33 to a pound (approx. 40 rupees to £3), and the pound itself averaged US$2.79. That means officially speaking the USD to INR rate would be closer to INR4.78. In 1966, India changed the peg to dollar at INR7.50.
Current exchange rates
Source of the article : Wikipedia
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