Meaning of the promise writting on every indian currency note.

Meaning of the promise writting on every indian currency note.

If you were to read carefully the writing on a hundred-rupee currency note, you would find a signed promise by the governor of the RBI, stating “I promise to pay the bearer the sum of one hundred rupees!” Isn’t this promise quite meaningless? After all, the governor is promising merely to exchange a one-hundred rupee note with one hundred rupees!
And yet, the promise demonstrates the evolution of currency notes issued by the central bank of a country and proves the faith which people have in the national currency. Quite a few millennia ago, man began using a variety if things as money. These articles, used as money, were portable, countable and could be exchanged with other individuals to acquire commodities. Shells, beads, and precious stones were a few such items which were used as money. With advances in metallurgy, precious metals, such as, silver and gold began to get used as money. Kings and queens started issuing their own gold and silver coins. As the volume and the value of transactions increased exponentially over time, people found it cumbersome and risky to carry valuable silver and gold wherever they went for business. Instead, they started depositing receipts. These deposit receipts were used as money, which were actually a proxy for the people’s silver and gold held with goldsmiths. Thus, private currency notes began to get issued and circulated. Governments, too, saw an opportunity in this development and started issuing their own paper currency which was backed by silver and gold. Interestingly, the currency term rupee, use in countries, such as, India, Indonesia, Pakistan, Nepal, and Sri lanka, is derived from the Sanskrit word for silver, rupyaka.
As time passed, the enormous growth in trade and commerce had to be measured in terms of currency, the supply of which was limited by the availability of silver and gold. Governments realized that, as long as people had faith in the government and its central bank, and, as long as money was used as medium of exchange, people would not come back to central bank to demand their silver or gold. Hence, governments discontinued the direct association between precious metals and the amount of paper currency. Today, RBI is not required to have more than Rs115 crores gold to back rupee currency. No wonder then, that the governor of RBI can only promise to pay hundred rupees to the bearer of a hundred-rupee note!

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Kunal Surve

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