How Indian Rupee works

Indian Rupee, one of the oldest currencies of the world is becoming an important currency in global marketplace. Lets have an oversight "how Indian rupee works". Who controls printing banknotes, who distributes it, how it reaches to common masses , how it is compared to other currencies of the world. We will try and find answer to these questions.

First thing first : History

Derived from Sanskrit word 'Raupya' which means silver coin was first introduced around 290BC by Chanakya. He is the first person to write a book on economics. Indian Rupee was earlier silver based entirely and this became the reason of "The fall of he Rupee" and the reason lies in 19th century. Firstly there was scarcity of silver throughout the world and developed economies began shifting their currency to gold standard. But Indian Rupee remained silver based and then history took a turn and large reserves of silver were discovered in United States and this was the time where value of Indian Rupee started to fall. After independence in 1959 Indian Rupee took over all currencies popular in the country and in 1957 rupee was divided in 100 units and were called 'Naye Paise' at that time. In 1947  1 US Dollar was equivalent to 3.30 INR and in 2013 it was 68.80 INR. The official symbol of INR '' was officially adopted in 2010.

Printing and Minting

Reserve Bank of India regulates Indian Rupee and has the sole right of printing banknotes. But Indian Government mints all the coins and has 4 minting facilities throughout India. In 1996 RBI introduced Mahatma Gandhi Series of banknotes and since then each legal banknote has potrait of Mahatma Gandhi. In 2012 RBI incorporated the new rupee symbol '' on all banknotes and coins. This symbol was designed by Uday at IIT Bombay. Interestingly an NGO in India prints 'Zero Rupee' note as form of protest and currently RBI issues 5, 10, 20, 50, 100, 500 and 1000 banknotes.

If you have seen a banknote  issued by RBI you will see a line written 'I promise to pay the bearer an amount of X ' .This means the bank is liable to pay the value of banknote to the bearer in exchange of coins of equivalent amount.



 

RBI decided to print polymer notes in 2009 and these banknotes will have more security features and 4 times longer life than paper based banknotes.

Security Features 

RBI has recently started a new website for increasing awareness about security features of banknotes which can be accessed from [su_permalink]www.paisaboltahai.rbi.org.in[/su_permalink].

Convertibility 

Indian rupee's exchange rates are mainly market based but RBI uses INR to US Dollar as de facto controlled exchange rate. But all depends on current policies and governor of RBI at that time because INR cannot be bound to one foreign currency otherwise it will increase volatility of Indian Rupee. RBI's job is not to decide the direction of Indian Rupee but to reduce it's volatility. RBI is managing this currency very well so far and their efforts are commendable. For viewing current exchange rates at any time please visit [su_permalink id="2" target="blank"]http://finance.yahoo.com/currency-converter/[/su_permalink]

So this was the brief introduction regarding Indian Rupee and valuable comments from readers are welcome.

Thank You