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Indian Prime Minister Narendra Modi announced 08 November 2016 the abolition of the country's largest-denomination banknotes to fight corruption. Modi said in a televised speech that 500 and 1,000-rupee notes would be withdrawn from circulation at midnight. 1,000 rupees are worth about 15 dollars. He said they will be replaced by new 500 and 2,000-rupee notes and people would be able to change their money at banks. Notes of one hundred, fifty, twenty, ten, five, two and one rupee will remain legal tender and will remain unaffected by the decision.

Modi said the Indian economy had been enjoying high growth while black money and corruption have also grown. He asked the public to help cleanse the country and at the same time not to panic. The deadline for exchanging old notes for new ones was 30 December 2016. There was also a limit on the amount that can be changed at one time. People have been flocking to ATMs in the capital, New Delhi. Long lines of vehicles formed at gas stations as people tried to use the larger notes.

The incidence of fake Indian currency notes in higher denomination had increased. For ordinary persons, the fake notes looked similar to genuine notes, even though no security feature had been copied. The fake notes were used for antinational and illegal activities. High denomination notes have been misused by terrorists and for hoarding black money. India remains a cash based economy hence the circulation of Fake Indian Currency Notes continues to be a menace. In order to contain the rising incidence of fake notes and black money, the scheme to withdraw was introduced.

the Prime Minister shared the insight into how the magnitude of cash in circulation is linked to inflation and how the inflation situation is worsened due to the cash deployed through corrupt means. The Prime Minister added that it adversely affects the poor and the neo-middle class people. He cited the example of the problems being faced by the honest citizens while buying houses.

Defending Prime Minister Narendra Modi's sudden announcement on Tuesday night declaring Rs 500 and Rs 1000 bank notes illegal, Finance Minister Arun Jaitley said the move will change the way Indians spend or keep their money. "This one decision will change the course of the way people spend and keep their money," Jaitley said in a press conference. In terms of Gazette Notification No 2652 dated November 08, 2016 issued by Government of India, 500 and 1000 rupee denominations of Bank Notes of the existing series issued by Reserve Bank of India (hereinafter referred to as Specified Bank Notes) shall cease to be legal tender with effect from 9th November, 2016, to the extent specified in the Notification. A new series of Bank Notes called Mahatma Gandhi (New) Series having different size and design, highlighting the cultural heritage and scientific achievements of the country, will be issued. Bank branches will be the primary agencies through which the members of public and other entities will be exchanging the Specified Bank Notes.

The Reserve Bank of India issued 500 rupee denomination banknotes in Mahatma Gandhi (New) Series with inset letter E in both the number panels, bearing the signature of Dr. Urjit R. Patel Governor, Reserve Bank of India, the year of printing '2016 and Swachh Bharat Logo printed on the reverse of the Banknote. The new 500 rupee banknotes are different from the earlier specified bank note (SBN) series in colour, size, theme, location of security features and design element. The Reserve Bank of India issued 2000 rupee denomination banknotes in the Mahatma Gandhi (New) Series, with the inset letter R, bearing signature of Dr. Urjit R. Patel, Governor, Reserve Bank of India, and the year of printing '2016' printed on the reverse of the banknote.



Money is an intrinsic component of the cultural heritage of a country mirroring its socio-economic history. India was one of the earliest issuers of coinage in the world and has been home to many-a-monetary experiment recorded in history. Financial Instruments and 'Hundies' in India have a venerable history. Hundis refer to financial instruments evolved on the Indian sub-continent used in trade and credit transactions. Technically, a Hundi is an unconditional order in writing made by a person directing another to pay a certain sum of money to a person named in the order. Hundis, being a part of the informal system have no legal status and are not covered under the Negotiable Instruments Act, 1881. Though normally regarded as bills of exchange, they were more often used as equivalents of cheques issued by indigenous bankers.

Paper Money, in the modern sense, traces its origins to the late eighteenth century with the issues of private banks as well as semi-government banks (the Bank of Bengal, the Bank of Bombay and the Bank of Madras alluded to as the Presidency Banks). Among the earliest issues were those by the Bank of Hindostan (1770-1832), the General Bank in Bengal and Bahar (1773-75, established by Warren Hastings), the Bengal Bank (1784-91), among others. Few of these notes survive.

Among the early issuers, the General Bank of Bengal and Bahar (1773-75) was a state sponsored institution set up in participation with local expertise. Its notes enjoyed government patronage. Though successful and profitable, the bank was officially wound up and was short lived. The Bank of Hindostan (1770-1832) was set up by the agency house of Alexander and Company was particularly successful. It survived three panic runs on it. The Bank of Hindostan finally went under when its parent firm M/s Alexander and Co. failed in the commercial crisis of 1832. Official patronage and the acceptance of notes in the payment of revenue was a very important factor in determining the circulation of bank notes. Wide use of bank notes, however, came with the note issues of the semi-government Presidency Banks, notably the Bank of Bengal which was established in 1806 as the Bank of Calcutta with a capital of 50 lakh sicca rupees. These banks were established by Government Charters and had an intimate relationship with the Government. The charter granted to these banks accorded them the privilege of issuing notes for circulation within their circles.

The Paper Currency Act of 1861 conferred upon Government of India the monopoly of Note Issue bringing to an end note issues of Private and Presidency Banks. Paper currency in India owed much to the intellectual stimulus and personal dynamism of Sir James Wilson, the first Finance Member in the Executive Council of the Viceroy of India. With the early death of Sir James, the task of issuing Government Paper Money in India devolved upon his successor Samuel Laing who substantially modified Wilson's original proposals.

Government of India continued to issue currency notes till the Reserve Bank of India was established on 1st April, 1935. When the one rupee note was reintroduced as a war time measure in August, 1940, it was issued by Government of India with the status of a coin. Government of India continued to issue Rupee one notes till 1994. The motifs appearing on Indian currency notes reflect the changing socio-cultural ethos and the world-view of the times: buccaneering mercantilism, colonial consolidation, domineering imperialism, the grandeur of empire, to the symbols of National Independence followed up by allegories of progress and finally in the latest series, reminiscing Gandhian values.

The transition of currency management from colonial to independent India was a reasonably smooth affair. Midnight, August 15, 1947 heralded Indian independence from colonial rule. The Republic, however, was established on 26th January, 1950. During the interregnum, the Reserve Bank continued to issue the extant notes. Government of India brought out the new design Re 1 note in 1949.

Symbols for independent India had to be chosen. At the outset it was felt that the King's portrait be replaced by a portrait of Mahatma Gandhi. Designs were prepared to that effect. In the final analysis, the consensus moved to the choice of the Lion Capital at Sarnath in lieu of the Gandhi Portrait. The new design of notes were largely along earlier lines.

In 1953, Hindi was displayed prominently on the new notes. The debate regarding the Hindi plural of Rupaya was settled in favour of Rupiye. High denomination notes (Rs 1,000, Rs. 5,000, Rs. 10,000) were reintroduced in 1954.

The lean period of the early sixties led to considerations of economy and the sizes of notes were reduced in 1967. In 1969 a commemorative design series in honor of the birth centenary celebrations of Mahatma Gandhi was issued depicting a seated Gandhi with the Sevagram Ashram as the backdrop. Cost benefit considerations prompted the Bank to introduce Rs. 20 denomination notes in 1972 and Rs. 50 in 1975.

High denomination notes were once again demonetised in 1978 for the same reasons as the 1946 demonetisation. The 1980s saw a completely new set of notes issued. The motifs on these notes marked a departure form the earlier motifs. The emphasis lay on symbols of Science & Technology (Aryabhatta on the Rs 2 note), Progress (the Oil Rig on Re 1 and Farm Mechanisation on Rs 5) and a change in orientation to Indian Art forms on the Rs 20 and the Rs 10 notes. (Konark Wheel, Peacock). Management of Currency had to cope with the rising demands of a growing economy, together with a fall in purchasing power. The Rupee 500 note was introduced in October 1987 with the portrait of Mahatma Gandhi. The water mark continued to be the Lion Capital, Ashoka Pillar.

With the advancement of reprographic techniques, traditional security features were deemed inadequate. It was necessary to introduce new features and a new 'Mahatma Gandhi Series' was introduced in 1996. A changed watermark, windowed security thread, latent image and intaglio features for the visually handicapped are amongst the new features.



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Page last modified: 10-11-2016 10:37:03 ZULU