Monday, November 14, 2016

894. The Story of Currency Notes......

Long Long ago there were no money and there was no trade, they only exchanged. Everyone exchanged what they had with what they want. It was later termed “Barter System.”After civilisation advanced metals like gold, silver, copper and lead were treated as means to exchange. 

Chanakya, the prime minister of Chandra Gupta Maurya (340-290 BC) mentions in his work Arthashastra the use of Gold (Suvarnarupa), Silver (Rupyarupa), Copper (Tamrarupa) and Lead (Sisarupa). For trading purpose they had gold, silver, copper and lead coins with the emblem of the kingdom which minted them. It became very difficult for the traders to carry the precious metals overseas for trading. Then promissory notes came into existence. 

Promissory notes were a certificate given to people who deposit gold or silver with someone whom they had trust. The promissory note had the details of how much gold worth was deposited. That promissory note could be exchanged for gold in the other place from another person. Those people who exchanged the promissory notes to gold came to be known as trustees. The trustees would charge a small amount to safe guard gold. 

People felt carrying few papers were much more safe than gold. While everything was going on well there cropped up a problem. The people who exchanged gold to promissory notes did not come back for gold instead circulated the promissory notes among themselves. Trustees felt why not issue more promissory notes than the amount of the gold reserves they had? From there started the beginning of modern currencies and the banking system. 

Trustees simply issued more promissory notes thinking that no one will come back to claim the gold. If all the people came back there was no enough gold to give them all but it never happened as none were worried about gold as long as the promissory notes were serving their purpose. And those promissory notes were given on loan to earn interest and people kept the promissory notes with the trustees to get the interest benefit. Those trustees sat fat on the gold reserves. Now promissory notes became the reserves to the bank and it was used to lend and earn interest. This is how the banking systems as we know today came into existence.

The early paper currency was introduced by Bank of Hindostan in 1770, General Bank of Bengal and Bihar 1773 by warren Hastings, Bengal Bank 1784. Indian rupee was based on silver reserve. For many years in the early and mid-20th century, the Indian rupee was the official currency in several areas that were controlled by the British and governed from India. The new one rupee note was designed in 1949 after independence. The portrait of King George VI was replaced by portrait of Mahatma Gandhi.

 In January 2012 Indian Rupee got a new sign “₹”. Many earned it by hard work and enjoyed by spending it, a few started to hoard making it stink. Indian Rupee began to rot in the vault of the rich and some even slashed it in the banks outside my country. They made enough money to take care of many generations. The need to curb Black Money became very crucial and hence the government led by Shri Narendra Damodardas Modi, our Prime Minister took a decision to demonetise the higher currency notes. 

Demonetization is a process of stripping the currency unit of its status as a legal tender.    

The main reason to demonetise is to tackle black money. To lower the cash circulation so that it puts a break to corruption in my country. To eliminate fake currency and dodgy funds which have been used by terror groups to fund terrorism in my country.

A welcome move I suppose..... Do you agree???   

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