|By Shreeshan V|
The Re 1 currency note is set to make a come back two decades after it was discontinued. The decision to bring the banknote back into circulation comes after deliberations last year regarding the authority of the Government to print currency notes of unit denomination.
While the Reserve Bank of India (RBI) announced the Government’s decision to reintroduce the note on February 14, it was already reported in sections of the media unofficially as early as December 2014.
Rupee coins are known to be melted and refashioned into razor blades and ornaments that fetch more than the face value of the coins. The size and weight of the coins have been changed to dissuade melting. Even the constitution of the Re. 1, Rs. 2 and the Rs. 5 coins have been changed from a Cupro-Nickel alloy to Ferratic Stainless Steel (FSS) as these are less profitable to melt and remould.
However, despite these measures, the Indian Government has been importing coins to make up for the shortage in supply.
While on one hand, Re 1 notes may be the solution to the coin shortage, on the other hand, the decision to put Re 1 notes in print again could also be designed to boost PM Modi’s pet project ‘Make in India’, despite the pitfalls of high printing costs and short life.
India has been importing currency paper primarily from NATO countries for the past 45 years.
In November last year, the initiative to source raw materials and produce currency paper locally was fast-tracked by the Prime Minister through the department of economic affairs. As a result, the cotton rags in use currently, for currency paper shall be procured from cotton producing states such as Gujarat and Maharashtra.
To achieve indigenisation of currency paper, the Security Printing and Minting Corporation of India (SPMCIL) is expanding by building Joint Venture bank note paper production lines at Mysore and Hoshangabad.
The expansion comes at a cost of about Rs. 1,985 crores and the two mills shall collectively have a capacity of 18,000 metric tonnes of indigenous currency paper.
The machines for the production of currency paper though are being sourced from Germany. First phase of production is slated to start in March, 2015.
The Re. 1 banknote holds a special place not only as it is the standard unit of Indian currency but also because it is the only denomination for which the Government itself prints the notes.Typically, the RBI holds sole rights of printing in accordance with the RBI Act, 1934 while the Government is the sole coin minting authority.
The Re.1 banknote is an exception provided for by the Currency Ordinance, 1940 before it was repealed seven decades after it was passed as a wartime measure. The Ordinance was replaced by the Coinage Act, 2011.
In September last year, the Law Ministry settled the debate about whether the government still had the authority to print Re. 1 banknotes since the Currency Ordinance had been repealed. In the Ministry’s opinion, the Coinage Act, 2011 has retained the provision for the Government to print Re.1 currency notes.
According to the Ministry, a coin is defined as being “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 coin and Government of India one rupee note”.
According to a highly placed source in the finance ministry, the notes RBI prints are promissory notes but not Re 1 notes. Re 1 notes are the ones based on which the promissory notes get value. This is the reason the government has decided to print these notes again.
The first Re 1 banknote was issued in 1917 and bore the photo of King George V. The note was not in circulation when the RBI Act, 1934 was passed and the Government’s right to print the denomination was consolidated with the Currency Ordinance, 1940.
The Government continued to print the note under this Ordinance until 1994 when it was discontinued due to printing costs, short life and to increase printing notes of higher denominations.
The move was followed by discontinuation of printing of the Rs. 2 and Rs. 5 notes in 1995 although notes of all three denominations are still in circulation.
Read more about the new Re.1 note here.
Peculiarities of the One Rupee note:
- The Re 1 note does not have the signature of the RBI governor like banknotes of other denominations. Instead, it bears the signature of the Finance Secretary of India as it is issued not by the RBI, but directly by the Government.
- Unlike notes of other denominations that have the “Bhartiya Reserve Bank” and “Reserve Bank of India” printed on them, the Re 1 note has “Bharat Sarkar” and “Government of India” printed on the note’s masthead.
- The Re 1 note does not have a silver lining security thread like notes of other values.
- Though the Re 1 denomination can be used to settle any sum, the note does not bear the statement “I promise to pay the bearer a sum of xx Rupees” since the note is technically considered as a coin under the Coinage Act, 2011.
Edited by: Mauli Buch