What is Legal Tender?
Legal tender refers to the officially recognized currency that must be accepted as payment for goods and services, settling debts within a particular jurisdiction, backed by government authority.
The coins issued by Government of India under Section 6 of The Coinage Act, 2011, shall be legal tender in payment or on account provided that a coin has not been defaced and has not lost weight so as to be less than such weight as may be prescribed in its case. Coin of any denomination not lower than one rupee shall be legal tender for any sum not exceeding one thousand rupees. Fifty paise (half rupee) coin shall be legal tender for any sum not exceeding ten rupees. While anyone cannot be forced to accept coins beyond the limits mentioned above, voluntarily accepting coins for amounts exceeding the limits mentioned above is not prohibited.
Every banknote issued by Reserve Bank of India (₹2, ₹5, ₹10, ₹20, ₹50, ₹100, ₹200, ₹500 and ₹2000), unless withdrawn from circulation, shall be legal tender at any place in India in payment or on account for the amount expressed therein, and shall be guaranteed by the Central Government, subject to provisions of sub-section (2) Section 26 of RBI Act, 1934. ₹1 notes issued by Government of India are also Legal Tender. ₹500 and ₹1000 banknotes of Mahatma Gandhi series issued up to November 08, 2016 have ceased to be Legal Tender with effect from the midnight of November 8, 2016.
Where are bank notes and coins produced/minted?
Bank notes are printed at four currency presses, two of which are owned by the Government of India through its Corporation, Security Printing and Minting Corporation of India Ltd. (SPMCIL) and two are owned by the Reserve Bank, through its wholly owned subsidiary, Bharatiya Reserve Bank Note Mudran Private Ltd. (BRBNMPL). The currency presses of SPMCIL are at Nasik (Western India) and Dewas (Central India). The two presses of BRBNMPL are at Mysuru (Southern India) and Salboni (Eastern India).
Coins are minted in four mints owned by SPMCIL. The mints are located at Mumbai, Hyderabad, Kolkata and NOIDA. The coins are issued for circulation only through the Reserve Bank in terms of Section 38 of the RBI Act.
What is a Currency Chest?
Currency chests, authorized by the RBI, store banknotes and coins on behalf of the RBI for distribution to bank branches. Select Scheduled banks have been authorized.
Role of the Reserve Bank of India in currency management
The RBI has the sole right to issue banknotes in India. It estimates the quantity of banknotes needed in different denominations in consultation with the Central Government and other stakeholders. The RBI also ensures the quality of banknotes (clean note policy) in circulation.
How does the Reserve Bank distribute currency to the people?
through its 19 Issue Offices at varied locations
currency chests with SCBs
offices located at Hyderabad, Kolkata, Mumbai and New Delhi (Mint Linked Offices) receive coins from the mints
What is the meaning of "I promise to pay" clause on the banknotes?
obligation on the part of the Bank towards the holder of the bank note
As per Section 26 of Reserve Bank of India Act, 1934, the Bank is liable to pay the value of banknote.
Banknotes currently in circulation
Banknotes in India are currently being issued in the denomination of ₹10, ₹20, ₹50, ₹100 ₹200, ₹500, and ₹2000. These notes are called banknotes as they are issued by the Reserve Bank of India.
₹2 and ₹5 have been coinised
Section 24 of the Reserve Bank of India Act, 1934 – maximum value of banknote can be ₹10,000 (was printed in 1938, demonetized in 1946 and then introduced in 1954 and demonetized in 1978)
Currency paper is made of 100% cotton (Q – should we shift to other materials like plastic?)
Fifteen languages are appearing in the language panel of banknotes in addition to Hindi
Non sequential numbering
Packets of banknotes with non-sequential numbering contain 100 notes which are not sequentially numbered.
introduced in 2011 consistent with international best practices (Q – how does it help? Shouldn’t notes be sequentially numbered?)
Who decides on the volume and value of banknotes to be printed and on what basis?
depends on various factors such as
(i) the expected increase in Notes in Circulation (NIC) and
(ii) the need for replacing soiled/mutilated notes
expected increase in NIC is estimated using factors like GDP, inflation, interest rates, growth in non-cash modes of payment etc.
Reserve Bank estimates the volume and value in consultation with GoI and printing presses
Are the banknotes issued by RBI backed by any assets such as gold?
All banknotes issued by RBI are backed by assets such as gold, Government Securities and Foreign Currency Assets, as defined in Section 33 of RBI Act, 1934.
What are the various types of banknotes issued since independence of India?
Ashoka Pillar Banknotes
Mahatma Gandhi (MG) Series 1996
Mahatma Gandhi series – 2005 banknotes
Mahatma Gandhi (New) Series (MGNS) – Nov 2016
What happens to the old design banknotes when a new design is introduced?
Both old and new design notes usually circulate together for a while. The old design notes are then gradually withdrawn from circulation
Security Features of banknotes in circulation
Indian banknotes (Mahatma Gandhi Series 2005 and Mahatma Gandhi (New) Series) have advanced security features.
Security threads in ₹10, ₹20, and ₹50 denominations fluoresce under UV light.
₹100 and above denominations have color-shifting security threads.
Intaglio printing on ₹100 and above denominations includes raised elements for the visually impaired.
See-through register makes numerals appear as one when held against light.
Watermark and electrotype watermark feature Mahatma Gandhi and denomination.
Color-shifting ink changes numeral color from green to blue at different angles.
Fluorescent ink and optical fibers glow under UV light.
Latent image of denomination visible when held horizontally and illuminated on ₹20 and above denominations.
Micro letterings help detect counterfeits.
Additional features since 2015
New numbering pattern
Angular bleed lines – helps visually challenged
sharp colour contrast scheme to facilitate identification by the partially visually challenged
Mobile Aided Note Identifier (MANI)
Mobile application launched by the Reserve Bank for aiding visually impaired persons to identify the denomination of Indian Banknotes
Soiled and Mutilated notes
Soiled Note: A banknote that has become dirty due to normal wear and tear, including two pieces pasted together from the same note with no essential feature missing.
Mutilated Banknote: A banknote with a portion missing or composed of more than two pieces.
Imperfect Banknote: A banknote that is obliterated, shrunk, washed, altered, or indecipherable, excluding mutilated banknotes.
Soiled and mutilated banknotes can be exchanged for their full value.
All banks, including non-customers, are authorized to accept and exchange soiled/mutilated banknotes.
The value of an imperfect banknote may be paid in full or half value as per the Note Refund Rules.
Small Finance Banks and Payment Banks may exchange mutilated and imperfect/defective notes at their discretion.
Are coloured/stained notes or scribbled notes legal tender?
Yes
Forged notes
A forged note is any currency note that lacks the characteristics of a genuine Indian currency note.
Genuine notes can be verified using visible, tactile, and tilting methods to identify security features.
Possession, circulation, or use of forged banknotes is an offense under Sections 489A to 489E of the Indian Penal Code, punishable by fines or imprisonment up to life, as per the severity of the offense.
Coins
Coin minting - Section 38 of RBI act - coins issued for circulation only through RBI.
Coins in India are issued in denominations of 50 paise, one rupee, two rupees, five rupees, ten rupees, and twenty rupees, up to ₹1000.
Twenty-five paise coins are no longer in circulation, while all other denominations remain legal tender.
Banks have no specific limits for coin deposits by customers.
The One Rupee note is a liability of the Government of India.
₹10 coins, with or without the rupee symbol, are legal tender.
The Government of India is responsible for designing and minting coins. The Government decides the quantity of coins to be minted based on yearly indents from RBI.
Coins are accepted as legal tender in all transactions as per RBI's instructions.
Commemorative coins can be obtained from SPMCIL's website or by contacting them.
Complaints about non-acceptance of coins or notes can be lodged with the concerned bank or the Banking Ombudsman Scheme for resolution.
Bank notes carry promise to pay bearer but coins carry no such promise
₹ Symbol
presented to the public by the Government of India in 2010
The new sign is a combination of the Devanagari letter "र" ("ra") and the Latin capital letter "R" without its vertical bar. The parallel lines at the top (with white space between them) makes an allusion to the tricolour Indian flag and also depict an equality sign that symbolizes the nation's desire to reduce economic disparity.
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