Maha Bharat: Episode 19

Who makes the Indian Rupee and how?

← See all episodes

First stop: The RBI. Then, the Government of India, from there, a design mill, a printing press, a bank, an ATM and finally, your wallet!

We trace the interesting history of the rupee and the journey it makes before it reaches you and runs your life!

Show Notes

All clips and voices used in this podcast are owned by the original creators

Links to clips used in this episode —

Full Transcript of Episode 19

First stop: RBI. Then, the Government of India. From there, a design mill, a printing press, a bank, an ATM and finally, your wallet! 

You must have figured out what I’m referring to: the journey of our rupee. 

The rupee is at the centre of the Indian economy as well as our own lives. But every single rupee note makes a long journey before it can reach you.

That’s what we’ll talk about today. In a previous episode about the RBI, I told you about the value of the rupee and how the RBI controls our economy. Today, let’s understand who makes the Indian rupee and how it reaches your hands.

The rupee – or the rupiya – is India’s official currency. We know about the several denominations of the rupee — coins in 1,2,5 and 10 rupees. The rupee notes in 10 rupees, 50 rupees, 100, 200, 500 and most recently, 2000 rupees. But what if I told you that there used to be a 5000 rupees note — and better yet, a 10,000 rupees note! 

In 1938, there was a Rs. 10,000 note that was released. It was demonetized later on, but introduced again in 1954. The Rs. 5000 note too, had been in circulation since 1949. Both were demonetised in 1978. But let me also tell you that according to the Reserve Bank of India Act, 1934 — the RBI is not authorized to print currency notes higher than Rs. 10,000. 

Coming back to today’s Rupee — Every day, we use our notes or coins to buy something from the market or pay someone for their service. But have you thought about why the rupee has any value? Think about that question. What gives the rupee its value?

The Rupee only has value because it is also an agreement between you and the Reserve Bank of India. If you look closely at a 10 rupee note you have for example, you’ll see that the RBI governor has signed under a statement that says, “I Promise to Pay the Bearer The Sum of 10 Rupees”. That is the guarantee that the RBI undertakes and that gives the rupee its value.

Suppose you submit a 100-rupees note to the Reserve Bank of India. In exchange, the RBI must compensate you with goods or gold that is 100 rupees in value. Yeh ho gayi kehne ki baat, but this means that the note is worth 100 rupees in the Indian market, and the RBI assures you of this with the Governor’s promise. That’s how the rupee note can be considered an agreement. 

Our rupee notes, all except the one-rupee note are printed by the Reserve Bank of India, with consultation from the Government of India. All our rupee coins, on the other hand, are minted under the authority of the Ministry of Finance in the Government of India. 

Before we talk about how the rupee is made today, let’s go back in time and understand how our currency changed over time. 

India was actually one of the first countries to mint coins (सिक्का ढाल्ना)as currency. Ancient Indian civilizations used different kinds of metals to make coins, in various parts of the country.

But these were not rupees!

It was in 1540, that Sher Shah Suri set up an administration that started minting silver coins called ‘rupiya’. This was divided into 40 copper pieces – called paisa. The Rupiya came from the Sanskrit word ‘rupyakam’ (रुपयाकम) which means a silver coin. 

The Rupiya became a popular currency throughout the Mughal Period in India, as well as during the British Rule. Haan, the British introduced new currency too – gold, copper and silver coins, but the rupee was widely accepted. 

Apart from the rupee, the gold mohur was used in northern India and the gold pagoda was the common currency in South India. In 1770, it was the Bank of Hindostan that printed the first rupee note — and other banks followed soon. Banks and princely states were making their own currencies. 

Now, imagine an India like this: there are different currencies, made out of different metals. Notes and coins have different values. And different regions accepted their own currencies. 

In the 1800s, the value of gold and silver started fluctuating (upar-neeche). So now, obviously, the value of the currencies started changing. The British government finally recognized this issue and introduced a ‘mono-metallic system’ — yaani, currency made out of only one metal. In 1835, the British started minting the silver rupee coin – the British Indian rupee. They also printed notes in the victoria series, with an illustration of Queen Victoria on every note.

The next step in the rupee’s journey was the formation of the Reserve Bank of India. The RBI was set up in 1935, and that’s when it started printing Britsh Indian rupee notes. The first rupee note printed by the RBI was the five-rupee note with George VI’s (George the Sixth) portrait on it! However, coins were still being minted by the British government of India. 

After independence, the government of the newly-formed India took over the responsibility of minting coins, but the RBI still had the authority to print notes. In 1950, the first Indian rupee was minted (banaya gaya?). And if you did not know, at this time, the rupee was divided into annas (अन्ना)! Every rupee was divided into 16 annas. 

So, the first rupee coins that were minted were half-rupees, one-fourth rupees, 2 anna and 1 anna coins. The rupee notes no longer featured British royalty — now, they had a Lion on it. If you still have old rupee notes saved, you’ll see that these notes have different symbols on them: Aryabhatta appeared on Rs. 2 notes, an oil rig appeared on the Re. 1 note to show industrial progress. Finally, in 1996, the Mahatma Gandhi note series was introduced — and it has continued till today!

The making of the Indian rupee is a careful process carried out by both, the RBI and the government of India. So, we know that the RBI prints the rupee notes and the government of India — the coins. If you remember, In 2018, a report from a chinese news outlet claimed that the Indian currency is printed in China. The Ministry of Finance was quick to correct this claim — it said that India is self-sufficient in meeting all of the country’s currency demands. 

In fact, Just four presses across India print all of the country’s currency.

The oldest one is the Nashik Printing Press, established in 1926. Then came the Dewas (देवास्) Printing Press, in 1975. More recently, in 1999 and 2000 the Mysore Printing Press and The Salboni (सालबोनी) Printing Press came into force. The Government of India controls the printing presses at Nashik and Dewas, The other two are controlled by the RBI. 

Now, you may be wondering: should the RBI print the currency by itself? Something as important as the country’s currency should be controlled by the government, right? The fact is, that while the RBI prints the currency, the government decides which denominations should be printed, the design of the notes and also approves how much money should be printed. 

Let’s go into a little detail. 

The first step in this process is to decide how much money should be printed every year. In the late 1800s, this decision was made on the basis of how much gold India has reserved. This was called the Gold Standard, and many countries around the world followed this simple rule: you can only produce as much currency as there is gold reserve in the country. The price of this gold is fixed and it determines the value of the currency. If there is any fluctuation (upar-neeche) in the amount of gold stored, then the value of the currency will be affected. 

Most countries that used the Gold Standard, including India, realized the restrictions that came with it. The supply of money was fixed. With more gold being discovered around the world, the value of gold, too, was unstable. Several countries completely abandoned this system.

In India, too, the gold standard was done away with in 1916, and fiat (फियाट) currency was introduced. 

Fiat currency matlab, a currency introduced by the government that is assigned a particular value that is guaranteed by the Government. 

The material used to make the currency has no value by itself. For example, a gold coin is worth its weight, because it’s gold, after all. But if a 100-rupee note didn’t have the rupee symbol on it, what would it be worth? Almost nothing. 

The government has assigned a value to the note and the Government is the guarantee for this value.

The question remains: how do they decide how much money should be printed?

Well, the RBI takes this decision at the beginning of every fiscal year. Two factors are taken into account: the number of notes still in circulation and the number of notes destroyed over the past year. After this, the RBI predicts the GDP growth, inflation and the electronic transactions that will take place next year. This information is collected from the 19 regional RBI offices around the country. 

Based on these factors, the RBI makes a report of the number of currency notes that should be printed. This report is presented to the Coins and Currency Divisions – CCD – in the Finance Ministry. The final decision is taken by a few senior officials of the RBI and the CCD – but the process of this decision making is kept a secret!

An order is placed for the final number of notes that has to be printed. This order is called an indent. An indent is issued for the notes as well as the coins to be produced. If you’re wondering what kind of an amount this comes to, at the end of the year 2015-16, the RBI had supplied 21.2 billion banknotes of different denominations! 

Now, let me take you through the process of making the Indian rupee. Let’s start with the coins! As we know, the Government of India mints the coins, not the RBI. The government of India also prints the one-rupee note. 

Wait, why only the one-rupee note?

Well, that’s because according to the Coinage Act of 2011, the Government of India has the authority to mint coins of all denominations. And according to this act, the one-rupee note is a coin! I’m not joking. 

The act describes a coin as: “made of any metal or any other material stamped by the Government or any other authority empowered by the Government in this behalf and which is a legal tender including commemorative (कमेमोरेटिव) coins and the Government of India one rupee note.” 

The one-rupee note was discontinued in 1994, but the government decided to bring it back in 2015. 

Let’s get back to how the coins are minted. So, after the RBI submits an indent to the Government, the Coins and Currency Division sends an order to get coins minted at the four India Government Mints. 

The oldest mint in our country is in Telangana, which was established by the Nizam of Hyderabad. It was taken over by the Government of India in 1950. The most recently built mint is in Noida, Uttar Pradesh. This mint was the first one to make stainless steel coins. The other two mints are in Mumbai and Kolkata. 

So, these four mints produce the required number of coins and these coins then reach the regional offices of the RBI. Several currency chests and coin depots also collect the coins. 

What are currency chests? These are branches of selected banks that stock rupee notes and coins. Coin Depots, too, serve the same function. These currency chests and coin depots distribute coins to the public, customers and other bank branches. 

There are 4422 currency chests and 3784 small coin depots in the country that give us our coins!

Here’s something you can do — remove a coin from your wallet, and see if there’s a small shape under the date of the coin. This is actually to  identify which location your coin was minted at!

The coins minted at the Mumbai mint will have a small dot or a diamond underneath the date of the coin. The Kolkata mint coins will have no marks at all under the date. Coins minted in Hyderabad will have a five-pointed star, and a Noida mint coin will have a thick dot under the date.

The journey of a banknote from an indent to your wallet is quite similar. There’s an added step here: making the material for banknotes. 

The interesting thing is that though this material is called a paper, it’s actually made out of cotton!

This paper is produced  by two mills – one is at Hoshangabad (होशंगाबाद) in Madhya Pradesh and the other is at Mysore, Karnataka. The Hoshangabad mill is under government control while Mysore mill is run by the RBI. 

The reason I’m mentioning these mills is because at this stage, certain security features are added to the rupee note: 

[We hear a Zee News report about a GPS feature on the currency note]

No, no, not that one. The news about the GPS chip installed into a 2000-rupee note spread after demonetization — but let me assure you, there is no such thing as a GPS chip in the rupee note. There are, however, other important security features!

Jaise ki, a security thread, which is a thin silver ribbon that is threaded through the note. This prevents counterfeiting — printing fake notes. The Mahatma Gandhi watermark on your note has a light-and-shade effect. 

If you really want to make sure your note is not fake, hold a magnifying glass on the small space between the Mahatma Gandhi portrait and the vertical band on the rupee note. You’ll see the word RBI printed in micro-letters!

The Hoshangabad (होशंगाबाद) mill can produce these high-security printing papers that can be cut into 8 billion bank notes. Just to give you an idea, these are enough notes that you could give every single person on earth a bank note — and still have some notes left. The Mysore mill can print double this quantity!

As far as the design of these notes is concerned, this is decided by the Ministry of Finance. When there’s a new note in circulation, the ministry sends across the details of this design to the mills. For instance, earlier this year the Ministry of Finance announced that a new one-rupee note will be printed. The government decided the new dimensions, the text on the note and the colour that it will be printed in. All this information will be sent to the mill which prints the paper.

So, once these security features and other basic designs have been added to printing paper, the paper is sent to four currency presses across the country: The Nashik, Dewas, Mysore and Salboni printing presses add the additional security feature of an optically variable ink to the rupee note.

The optically variable ink, too, is an anti-counterfeit measure. On Rs. 2000 and Rs. 500 bills, the numerical of 2000 and 500 is printed in this ink. When you hold the note flat, the number appears green. If you hold the note at an angle, it will appear blue. 

The printing presses print the banknotes on these papers. The papers are cut into the required measurements, bundled and sent off to RBI. 

The RBI then transports the notes to its regional centres and storage vaults across the country. From these vaults, the currency notes reach banks and their respective ATMs — and lastly, to your hands!

We’ve been talking about how the RBI decides the number of rupee notes and coins to produce  for the country. The process, too, is fairly straightforward. So, the question is, why doesn’t the RBI just print money when there is a financial crisis in the country? That will solve all the problems, right?

Well, not quite. 

The amount of money in the market determines the demand and supply of goods and services. This can include a packet of biscuit, or the price of a car. This demand and supply of goods will also determine the amount of goods and services produced in a country.

Okay, imagine the RBI starts printing more currency notes to battle a crisis. This will mean that the banks have more money — and as a consequence, we, the citizens will borrow more money. We now have more money on our hands — we’ll want to buy and invest in more products and services, right? As a result, the demand for goods will shoot up. And what happens when the supply of a product remains constant and the demand goes up?

The prices increase!

Eventually, such a situation leads to inflation – yaani, price rise in the market. This is why the RBI doesn’t print unlimited currency. 

However, there is one instance where the RBI had to print an extra round of new, expensive notes. I’m sure you know what I’m talking about. 

[We hear the voice of Narendra Modi announcing demonitization]

After the Rs. 500 and Rs. 1000 notes were demonetized in November,  2016, the RBI printed new Rs. 200, 500 and Rs. 2000 notes in the beginning of the 2016-17 fiscal year. That year, the cost of printing the new notes reached nearly Rs. 8000 crore. 

While the cost of printing currency every year usually goes into crores, I was curious about how much it costs to print a single note. So, I found that it costs between Rs. 1 and Rs. 4 to print every rupee note. The Rs. 10, 20 and 50 notes cost only Re. 1 to print, but the Rs. 2000 note costs Rs. 3.54.

The rupee coins are slightly more expensive — it costs Rs. 1.28 to mint a 2-rupee coin, a 10-rupee coin costs Rs. 5.54. But the most interesting thing I found was that it costs Rs. 1.11 to mint a one-rupee coin — more than the value of the coin itself! 

All this talk about the rupee notes — but how often have we heard about India becoming a “cashless economy”? With demonetization, came the promise of a cash-free economy, where most transactions could be done digitally. And let’s be honest, we have definitely taken a few positive steps in that direction. 

The Digital India initiative encouraged people to set up a UPI account across the country. Now, you probably won’t be surprised to see your local chaiwala or grocery store have a UPI card kept out front. Digital wallets such as PayTM and Google Pay allow you not only to exchange money digitally among yourselves, but also pay electricity bills, pay for grocery, movie tickets, food delivery. I’m sure you’d agree that the urban section of India is definitely moving toward a cashless economy.  

But let me ask you myself — would you be willing to go completely cashless? 

Probably not. An Economic Times survey revealed this, too. Most Indians are still cash-reliant. They trust physical currency more, and the circulation of cash in the Indian economy has only increased. 

To become a completely cashless economy, India needs physical infrastructure, like high-speed internet, wide mobile networks and banks in every village and city. Most importantly, there also needs to be wider awareness in rural areas — areas where people still rely mostly on cash transactions. 

If you ask me, India definitely has the potential to become a cashless economy. But we still have a long way to go. 

Until then, the RBI will keep printing our currency, and now you know how!

That’s it for this episode, folks! I hope we had fun learning about the journey of the rupee — and I hope it made you curious to find out more.

I’ll be back next week with a new episode of Maha Bharat! 

Credits

Narrated by – Dhruv Rathee
Producer – Gaurav Vaz
Written by – Gaurav Vaz and Anushka Mukherjee

Title Track Design – Abhijith Nath
Audio Production – Madhav Ayachit