Forex for a trader
What is forex reserve quora

What is forex reserve quora10 Countries With The Biggest Forex Reserves. Foreign currency reserves are vital to a nation's economic well-being. Without adequate reserves, an economy can grind to a halt. The country may be unable to pay for critical imports like crude oil or service its external debt. The International Monetary Fund (IMF) defines reserve assets as external assets that a country’s monetary authority can use to meet the balance of payments financing needs, use to affect currency exchange rates in currency exchange markets, and other related purposes. Most nations hold the vast majority of their foreign currency reserves in U. S. dollars and a much smaller portion in euros. A sizeable war chest of foreign currency reserves is especially handy during a currency crisis since it can be used to defend against speculative attacks on the national currency. Russia, which holds substantial foreign currency reserves, is a good example. In 2014, the United States and the European Union imposed economic sanctions on Russia for its involvement in the Ukraine conflict. Coupled with a 50 percent plunge in the price of crude oil (Russia's largest export and a key driver of its economy), these sanctions severely impacted the Russian economy. The ruble slid 40 percent against the dollar in 2014, but the outcome could have been far worse had Russia had not intervened in foreign exchange markets to prop up the ruble, expending more than $80 billion of its reserves in doing so. The ruble further strengthened throughout 2015-2018 as the political situation in Ukraine has somewhat calmed. Further potential sanctions related to the Skripal poisoning could have a dampened effect as the " the Russian economy has adapted to the post-sanctions environment and is less dependent on foreign goods or flows than a few years ago," said Robert Simpson of Insight Investments in an email to MarketWatch. What is a 'Reserve Currency' A reserve currency is a large quantity of currency maintained by central banks and other major financial institutions to prepare for investments, transactions and international debt obligations, or to influence their domestic exchange rate. A large percentage of commodities, such as gold and oil, are priced in the reserve currency, causing other countries to hold this currency to pay for these goods. USD (United States Dollar) International Currency Exchange .

BREAKING DOWN 'Reserve Currency' Holding a reserve currency minimizes exchange rate risk, as the purchasing nation will not have to exchange its currency for the current reserve currency in order to make the purchase. Since 1944, the U. S. dollar has been the primary reserve currency used by other countries. As a result, foreign nations closely monitored the monetary policy of the United States in order to ensure that the value of their reserves is not adversely affected by inflation. How the U. S. Dollar Became the World’s Reserve Currency. The post-war emergence of the U. S. as the predominant economic power had enormous implications for the global economy. At one time, its GDP represented 50% of the world’s output, so it only made sense that the U. S dollar would become the global currency reserve. In 1944, following the Bretton Woods Agreement, delegates form 44 nations formally agreed to adopt the U. S. dollar as an official reserve currency. Since then, other countries pegged their exchange rates to the dollar, which was convertible to gold at the time. Because the gold-backed dollar was relatively stable, it enabled other countries to stabilize their currencies. In the beginning, the world benefited from a strong and stable dollar, and the United States prospered from the favorable exchange rate on its currency. The foreign governments did not fully realize that although their currency reserves were backed by gold reserves, the United States could continue to print dollars that were backed by its Treasury debt. As the United States printed more money to finance its spending, the gold backing behind the dollars diminished.

The continued printing of money beyond the backing of gold reserves reduced the value of the currency reserves held by foreign countries. The GoldDollar Decoupling. As the United States continued to flood the markets with paper dollars to finance its escalating war in Vietnam and the Great Society programs, the world grew cautious and began to convert dollar reserves into gold. The run on gold was so extensive that President Nixon was compelled to step in and decouple the dollar from the gold standard, which gave way to the floating exchange rates we see today. Soon after, the value of gold tripled, and the dollar began its decades-long decline. This is What Will Happen When the Indian Government Demonetizes ?500 and ?1000 Notes. What do you think of the decision by the Indian Government to demonetize ?500 and ?1000 notes? originally appeared on Quora - the knowledge sharing network where compelling questions are answered by people with unique insights . Answer by Awdhesh Singh, IRS officer with 25 years of expereince in Government, on Quora. The decision by the Indian Government to demonetize ?500 and ?1000 notes is a great step for curbing black money (acquired legally but tax not paid) and dirty money (acquired through illegal source) in India. The move is so unexpected that people have no time at all to remove their black money, so this would become simply a waste of paper for them. I can't imagine any better move than this to eliminate black money from the country. However, its immediate impact is likely to be very adverse on the stock market and the sectors like real estate where lot of black money is used. Its impact on the other sectors would be as following.

The sale of gold and diamond jewelry would drastically decline. This means less outgoing foreign currency, hence a better balance of payment situation. Corruption would be reduced drastically. Credit card and other legal transactions would go up. Taxes (Income Tax, Excise, Service tax and Sales Tax) would go up substantially since more transactions would be in white. Criminal activities would reduce. Use of illegal money in elections would be reduced drastically. Property rates would reduce drastically. There would, however, be a lot of chaos in first few days. Then everything would fall in its place. This question originally appeared on Quora. - the knowledge sharing network where compelling questions are answered by people with unique insights.

You can follow Quora on Twitter, Facebook, and Google+. 10 Countries With The Biggest Forex Reserves. Foreign currency reserves are vital to a nation's economic well-being. Without adequate reserves, an economy can grind to a halt. The country may be unable to pay for critical imports like crude oil or service its external debt. The International Monetary Fund (IMF) defines reserve assets as external assets that a country’s monetary authority can use to meet the balance of payments financing needs, use to affect currency exchange rates in currency exchange markets, and other related purposes. Most nations hold the vast majority of their foreign currency reserves in U. S. dollars and a much smaller portion in euros. A sizeable war chest of foreign currency reserves is especially handy during a currency crisis since it can be used to defend against speculative attacks on the national currency. Russia, which holds substantial foreign currency reserves, is a good example. In 2014, the United States and the European Union imposed economic sanctions on Russia for its involvement in the Ukraine conflict. Coupled with a 50 percent plunge in the price of crude oil (Russia's largest export and a key driver of its economy), these sanctions severely impacted the Russian economy. The ruble slid 40 percent against the dollar in 2014, but the outcome could have been far worse had Russia had not intervened in foreign exchange markets to prop up the ruble, expending more than $80 billion of its reserves in doing so. The ruble further strengthened throughout 2015-2018 as the political situation in Ukraine has somewhat calmed. Further potential sanctions related to the Skripal poisoning could have a dampened effect as the " the Russian economy has adapted to the post-sanctions environment and is less dependent on foreign goods or flows than a few years ago," said Robert Simpson of Insight Investments in an email to MarketWatch. What is Minimum Reserve System?

How new currencies are issued by the RBI? The relationship between note issue and its reserve backing is usually done on the basis of a reserve system by central banks across the world. The reserve system provides guidelines for the issue of new currencies. In India, currencies are issued by the RBI with the backing of reserves comprised of gold and foreign exchange (foreign currencies). For the issue of currencies, the RBI follows Minimum Reserve System at present. The Minimum Reserve System (MRS) is followed from 1956 onwards. Under the Minimum Reserve System, the RBI has to keep a minimum reserve of Rs 200 crore comprising of gold coin and gold bullion and foreign currencies. Out of the total Rs 200 crores, Rs115 crore should be in the form of gold coins or gold bullion. The purpose of shifting to MRS was to expand money supply to meet the needs of increasing transactions in the economy. The minimum reserve is a token of confidence and doesn’t have any practical connection with amount new currencies issued by the RBI. Under the Minimum Reserve System, RBI can issue unlimited amount of currency by keeping the reserve. But RBI follows some principle or rule for issuing new currencies based upon economic growth and transaction needs of the people.

How RBI issues new currencies? For every year, RBI makes a money supply expansion target based on the expected economic growth. Higher the economic growth, higher will be the expansion of newly issued money by the RBI. This strategy helps RBI to contain inflation as well as enabling people to meet their transaction needs. Similarly, the RBI secures assets while issuing new currency into the economy. These assets are foreign currencies or government bonds. Every unit of new currency is a liability of the RBI. To match this liability, there should be equal volume of assets as well. The procured foreign currency and government bonds constitute to the assets of the RBI whereas the newly issued currency is its liability. Foreign currencies purchased by the RBI are kept at Banking Department whereas the resaves used for issuing new currency (under MRS) is kept at Issue Department. How the U. S. Dollar Became the World's Reserve Currency. The first U. S. dollar, as it is known today, was printed in 1914 upon the creation of the Federal Reserve Bank. Less than six decades later, the dollar officially became the world’s reserve currency. However, its ascendancy to the throne began not long after the ink was dry on that first printing. The Birth of the U. S. Dollar. The Federal Reserve Bank was created by the Federal Reserve Act of 1913 in response to the unreliability and instability of a currency system based on bank notes issued by individual banks. At that time, the U. S. economy had overtaken Britain’s as the world’s largest, but Britain was still the center of world commerce, with much of it transacted in British pounds.

Also at that time, most of the developed countries pegged their currencies to gold to create stability in currency exchanges. However, when World War I broke out in 1914, many countries abandoned the gold standard to be able to pay their military expenses with paper money, which devalued their currencies. The Dollar’s Ascendancy to the Throne. Three years into the war, Britain, which had steadfastly held to the gold standard to maintain its position as the world’s leading currency, found itself having to borrow money for the first time. The United States became the lender of choice for many countries that were willing to buy dollar-denominated U. S. bonds. In 1919, Britain was finally forced to abandon the gold standard, which decimated the bank accounts of international merchants who traded in pounds. By then, the dollar had replaced the pound as the world’s leading reserve. As it did in World War I, the United States entered World War II well after the fighting had started. Before it entered the war, the United States served as the Allies’ main proprietor of weapons, supplies and other goods. Collecting much of its payment in gold, by the end of the war, the United States owned the vast majority of the world’s gold. This precluded a return to the gold standard by all of the countries that had depleted their gold reserves. In 1944, delegates from 44 Allied countries met in Bretton Wood, New Hampshire, to come up with a system to manage foreign exchange that would not put any country at a disadvantage. It was decided that the world’s currencies couldn’t be linked to gold, but they could be linked to the U. S. dollar, which was linked to gold. The arrangement, which came to be known as the Bretton Woods Agreement, established that the central banks would maintain fixed exchange rates between their currencies and the dollar.

In turn, the United States would redeem U. S. dollars for gold on demand. Countries had some degree over the currencies in situations where their currency values became too weak or too strong relative to the dollar. They could buy or sell their currency to regulate the money supply. Standing on Its Own as the World’s Reserve Currency. As a result of the Bretton Woods Agreement, the U. S dollar was officially crowned the world’s reserve currency, backed by the world’s largest gold reserves. Instead of gold reserves, other countries accumulated reserves of U. S. dollars. Needing a place to store their dollars, countries began buying U. S. Treasury securities, which they considered to be a safe store of money. The demand for Treasury securities coupled with the deficit spending needed to finance the Vietnam War and the Great Society domestic programs caused the United States to flood the market with paper money. With growing concerns over the stability of the dollar, the countries began to convert dollar reserves into gold. The demand for gold was such that President Richard Nixon was forced to intervene and delink the dollar from gold, which led to the floating exchange rates that exist today. The US Will Remain the World's Reserve Currency. The U. S. dollar is no immediate danger of losing its reserve currency status.

Some financial commentators continually predict the loss of the U. S. dollar as the main international reserve currency. Critics cite the attempt of China to push its yuan to reserve currency status. They also say that U. S. quantitative easing and large budget deficits will ultimately have the effect of cheapening the dollar so that it is no longer the reserve currency. Despite these predictions of the U. S. dollar's demise, the doom and gloom never seems to pass. Instead, the U. S. dollar has strengthened significantly during 2014 to 2015 in the wake of economic headwinds in Greece, China and other places around the globe. At this point in time, it appears the calls for the death of the dollar are unfounded. Rise of the US Dollar. The U. S. dollar has enjoyed status as the leading currency for decades. In the wake of World War II, prominent countries signed the Bretton Woods agreement, which dominated international monetary policy until 1971. Under the terms of this agreement, the United States agreed to exchange U. S. dollars for gold at a fixed rate of $35 per ounce. The currencies of other countries were then pegged to the U. S. dollar within a 1% deviation limit. The agreement also created the International Monetary Fund (IMF) and the World Bank. The IMF was formed to monitor the exchange rates and to lend currency reserves to countries with trade deficits.

This system remained in place until 1971, when the U. S. abandoned the gold standard. Richard Nixon addressed issues with a potential gold run and domestic inflation by creating a new economic plan with his advisers. Nixon addressed the nation on Aug. 15, 1971, stating that abandoning the gold standard would ease inflation and help unemployment. The post-Bretton Woods system is one of floating exchange rates. The U. S. dollar has still remained the reserve currency even after the end of the Bretton Woods system. Unlike many other countries, the U. S. dollar has never been devalued, and its notes have never been invalidated. This is one of the reasons why the U. S. dollar maintains a favored status. The Rise of the Chinese Yuan? Those predicting the demise of the U. S. dollar point to China as a major concern. China is pushing hard to have the renminbi , or yuan, lifted to a reserve currency status.

By gaining reserve status, central banks might begin to increase their yuan holdings. The Chinese government has been pleading its case to the IMF. It must prove that the yuan is available for use in international markets. China has discussed opening up its markets to international investment. However, China decided unexpectedly to devalue the yuan in August 2015. In a move that surprised international markets, China devalued the yuan, causing the largest one-day loss in 20 years. This seems to conflict with its attempts to become a reserve currency. The Chinese government states the devaluation will allow the currency to be more market-driven. The yuan had been gaining strength during the prior decade. Some believe that the devaluation was intended to make Chinese exports cheaper. It is unclear what effect the devaluation will have on the bid to become a reserve currency. This is What Will Happen When the Indian Government Demonetizes ?500 and ?1000 Notes. What do you think of the decision by the Indian Government to demonetize ?500 and ?1000 notes? originally appeared on Quora - the knowledge sharing network where compelling questions are answered by people with unique insights . Answer by Awdhesh Singh, IRS officer with 25 years of expereince in Government, on Quora.

The decision by the Indian Government to demonetize ?500 and ?1000 notes is a great step for curbing black money (acquired legally but tax not paid) and dirty money (acquired through illegal source) in India. The move is so unexpected that people have no time at all to remove their black money, so this would become simply a waste of paper for them. I can't imagine any better move than this to eliminate black money from the country. However, its immediate impact is likely to be very adverse on the stock market and the sectors like real estate where lot of black money is used. Its impact on the other sectors would be as following. The sale of gold and diamond jewelry would drastically decline. This means less outgoing foreign currency, hence a better balance of payment situation. Corruption would be reduced drastically. Credit card and other legal transactions would go up. Taxes (Income Tax, Excise, Service tax and Sales Tax) would go up substantially since more transactions would be in white. Criminal activities would reduce. Use of illegal money in elections would be reduced drastically. Property rates would reduce drastically.

There would, however, be a lot of chaos in first few days. Then everything would fall in its place. This question originally appeared on Quora. - the knowledge sharing network where compelling questions are answered by people with unique insights. You can follow Quora on Twitter, Facebook, and Google+. International Reserves. What are 'International Reserves' International reserves are any kind of reserve funds, which central banks can pass among themselves, internationally. International reserves remain an acceptable form of payment among these banks. Reserves themselves can either be gold or a specific currency, such as the dollar or euro . Reserve Requirements. BREAKING DOWN 'International Reserves' Many countries also use international reserves to back liabilities, including local currency, as well as bank deposits. Examples of International Reserves: Special Drawing Rights (SDR) Special drawing rights (SDR) are another form of international reserves. The International Monetary Fund (IMF) created SDRs in 1969 in response to concerns about the limitations of gold and dollars as the only means of settling international accounts. SDRs can enhance international liquidity by supplementing standard reserve currencies. Member countries' governments back SDRs with their full faith and credit .

A SDR is essentially an artificial currency. Some describe SDRs as baskets of national currencies . IMF member states holding SDRs can exchange them for freely usable currencies (such as USD or Japanese Yen), either by agreeing among themselves or via voluntary swaps . In addition the IMF may instruct countries with stronger economies or larger foreign currency reserves to buy SDRs from its less-endowed members. IMF member countries are able to borrow SDRs from IMF reserves at good interest rates. (They generally use these to adjust their balance of payments to become more favorable.) The IMF also uses SDRs for internal accounting purposes as the SDR is the unit of account of the IMF, in addition to acting as an auxiliary reserve asset. SDRs’ value, which the IMF sums up in U. S. dollars, is calculated from a weighted basket of major currencies: Japanese yen, U. S. dollars, Sterling and the Euro. International Reserves v. Foreign Exchange Reserves. Similar to international reserves, foreign exchange reserves are also reserve assets, which a central bank holds in foreign currencies. These may include foreign banknotes, bank deposits, bonds, treasury bills and other government securities.

Colloquially, the term foreign exchange reserves may also mean gold reserves or IMF funds. Central banks may use foreign exchange reserves to back liabilities on their own currency. In addition foreign exchange reserves may be useful in influencing monetary policy. In general foreign exchange reserves allow a central government more flexibility and resilience in volatile market conditions. For example, if one or more currencies crash andor become rapidly devalued, a central bank may balance this temporary loss with other, more highly valued andor stable, currencies, in order to help them withstand markets shocks. 1.1 Learning Objectives. 1.2 History of Indian Coins and Currency. 1.2.1 Denomination of banknotes and coins issued in India. 1.2.2 Issuer of banknotes and coins. 1.3 Importance of "Legal Tender" 1.3.1 Promissoiry Clause.

1.4 Currency Management. 1.4.1 Role of Reserve Bank of India. 1.4.2 Role of Government of India. 1.4.3 Decision regarding volume and value of banknotes to be printed. 1.4.4 Circulation of banknotes and coins. 1.4.5 Role of Currency Chests and Coin Depots. 1.5 Soiled and Muitilated Bank Notes. 1.5.1 Exchange of Soiled and Mutilated Notes. 1.6 Counterfeit and Forged Notes. 1.6.1 Security Features in banknotes. 1.7 Clean Note Policy. 1.8 Let us sum up. 1.10 Refernce and Further readings.

1.11 Answer to Self Assessment Questions. You know that money is defined as anything that is generally accepted as payment for goods and services and repayment of debts. The main uses of money for us are as a medium of exchange, a unit of account, and a store of value. You may find that money as a means of payment consists of coins, paper money and withdrawable bank deposits by cheques and withdrawal slips. Today, you have credit cards, debit cards, electronic cash and mobile banking , which also form an important component of the payment system but for a common person like us , money simply means currency and coins. This is so because in India, the payment system, especially for retail transactions still revolves mainly around currency and coins. We know that the Indian currency is called the Indian Rupee (INR) and the coins are called paise. One Rupee consists of 100 paise. Describe the history of Indian currency and coins; Explain legal tender; Discuss issues related to currency management; Distinguish between genuine and counterfeit banknote; and Preach and practice a clean neat policy. It would be interesting for us to know that the first documented coinage seems to have started with ' Punch Marked' coins issued between the 7th-6th Century BC and 1st Century AD. You can classsify the coin age into the following periods: d. Late pre-colonial. e. British India. f. Republic India. You can see some ancient coins below, which were in circulation in our provincial states. They were isuued by different states under various kings: Now you see the modern day coins here, which of course have undergone changes over a period of time: Our country won its independence on August 15, 1947. During the period of transition India retained the monetary system and the currency and coinage of the earlier period.

India brought out its distinctive coins on 15th August, 1950. Our coins are presently being issued in denominations of 25 paise, 50 paise, one rupee, two rupees and five rupees. Coins upto 50 paise are called 'small coins' and coins of Rupee one and above are called 'Rupee Coins'. Our coins can be issued up to the denomination of Rs.1000 as per the Coinage Act, 1906. Our financial instruments and 'Hundies' in India have a venerable history. Our paper money, in the modern sense, traces its origins to the late eighteenth century with the issues of private banks as well as those of semi-government banks. The Paper Currency Act of 1861 conferred upon Government of India the monopoly of Note Issue bringing to end banknote issues of Private and Presidency Banks. Government of India continued to issue currency notes till the Reserve Bank of India (RBI) was established on 1st April, 1935. Reserve Bank issued banknotes in January 1938 when the first Five Rupee banknote was issued bearing the portrait of George VI. This was followed by Rs. 10 in February, Rs. 100 in March and Rs. 1,000 and Rs. 10,000 in June 1938. The George VI series continued till 1947 and thereafter as a frozen series till 1950 when post independence banknotes were issued, with the Ashoka Pillar watermark. Our banknotes in the Mahatma Gandhi Series were introduced in 1996 and were issued in a phased manner in the denominations of Rs.5, Rs.10, Rs.20, Rs.50,Rs.100, Rs.500 and Rs.1000. You can have a look below at the modern day currency notes, which we use in our day to day transactions. The following are some old Indian currency notes: Below here you can see how our old British currency notes looked like! The following are some other old British curreny notes: 2. Banknotes in the Mahatma Gandhi series were introduced in the year ______.

3. Hundies are ____________. At present, our banknotes in India are issued in the denomination of Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000. You call these notes as banknotes as they are issued by the Reserve Bank of India. Our printing of notes in the denominations of Re.1, Rs. 2 and Rs.5 has been discontinued as these denominations have been coinised. However, you can find such banknotes issued earlier in circulation and these banknotes continue to be legal tender for us. The Reserve Bank can also issue banknotes in the denominations of five thousand rupees and ten thousand rupees, or any other denomination that the Central Government may specify. Though, you cannot have banknotes in denominations higher than ten thousand rupees in terms of the current provisions of the Reserve Bank of India of Act, 1934. Our coins can be issued up to the denomination of Rs.1000. Demonetization of higher denomination banknotes. We find that Rs. 1000 and Rs.10000 banknotes, which were then in circulation were demonetized in January 1946, primarily to curb unaccounted money in our system. However, we reintroduced the higher denomination banknotes in Rs.1000, Rs.5000 and Rs.10000 in the year 1954, and these banknotes (Rs.1000, Rs.5000 and Rs.10000) were again demonetized in January 1978. Present available denominations of coins in circulation in India. Presently we have 25 paise, 50 paise, one rupee, two rupees and five rupee coins being issued. Our coins up to 50 paise are called 'small coins' and coins of Rupee one and above are called 'Rupee Coins'. Though our coins in the denomination of 1 paise, 2 paise, 3 paise, 5 paise, 10 paise and 20 paise may still be in circulation, but due to lack of demand we have discontinued the issue of such coins. 2. Coins can have a maximum value of Rs.________.

3. Can you recollect the year in which the high denomination notes were demonitized last? 4. What are Rupee coins? In India our coins are minted by the Government of India mints while the notes are printed by the Reserve Bank of India (RBI) and Government of India presses. We have four mints in India located at Kolkata, NOIDA, Mumbai and Hyderabad. Regarding note printing presses RBI has its Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL) presses at Salboni in West Bengal which is about 200 kms from Kolkata and another one at Mysore in Karnatka. you will find the government presses located at Dewas in Madhya Pradesh and Nasik in Maharashtra. You may understand that most of the high denomination notes are printed at RBI presses. 2. What name is given to the RBI note printing presses? 3. Name the places where the the Government mints are located. What is legal tender? Our coins which are issued under the authority of Section 6 of the Coinage Act, 1906 , shall be legal tender in payment or on account i. e. 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: - (a) coin of any denomination not lower than one rupee shall be legal tender for any sum, (b) half rupee coin shall be legal tender for any sum not exceeding ten rupees, (c) any other coin shall be legal tender for any sum not exceeding one rupee Section 13 of The Coinage Act, 1906. Similarly, your One Rupee notes issued under the Currency Ordinance, 1940 are also legal tender and included in the expression Rupee coin for all the purposes of the Reserve Bank of India Act, 1934. Your every banknote issued by Reserve Bank of India (Rs.2, Rs.5, Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000) 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. You will find a Promissory Clause in all the banknotes.

What exactly is this? This means that as per Section 26 of Reserve Bank of India Act, 1934, the Bank is liable to pay you the value of a banknote. This is payable to you on demand by RBI, being the issuer. The Bank's obligation to pay the value of banknote to you does not arise out of a contract but out of statutory provisions. The promissory clause printed on the banknotes i. e., "I promise to pay the bearer an amount of X" is a statement which means that your banknote is a legal tender for X amount. The obligation on the part of the Bank is to exchange your banknote for coins of an equivalent amount. 2. Who is the promissory in banknote? 3. The guaranteer of a banknote is RBI.-(TrueFalse) We find that the Department of Currency Management (DCM) in Reserve Bank of India has the responsibility of administering the functions of currency management, a core function of the Reserve Bank in terms of the Reserve Bank of India Act, 1934. For us currency management essentially relates to issue of our notes and coins and retrieval of unfit notes from circulation. This work is performed through 18 issue offices of the Reserve Bank and a wide network of 4195 currency chests, 488 repositories and 3562 small coin depots managed by banks and Government treasuries.

The Reserve Bank derives its role in currency management from the Reserve Bank of India Act, 1934.The Reserve Bank manages currency in India for us. Our Government, on the advice of the Reserve Bank, decides on various denominations of banknotes to be issued for us. The Reserve Bank also co-ordinates with the Government in the designing of of our banknotes, including the security features. The Reserve Bank estimates the quantity of banknotes that are likely to be needed denomination-wise and accordingly, places indent with the various printing presses. We find that the banknotes which are received from banks and currency chests are examined and those fit for circulation are reissued and the others (soiled and mutilated) are destroyed so as to maintain the quality of banknotes in circulation. As you already know Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Central Office of the Reserve Bank of India was initially established in Calcutta (now Kolkata) but was later shifted to Mumbai (then Bombay) in 1937. The Central Office is where the Governor sits and where policies are formulated. Though, originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India. The Preamble of the Reserve Bank of India describes the basic activities of the Reserve Bank as: ". to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.

" The follwing map shows the location of RBI offices: In terms of Section 25 of RBI Act, 1934 the design of our banknotes is required to be approved by the Central Government on the recommendations of the Central Board of the Reserve Bank of India. The responsibility for our coinage vests with the Government of India on the basis of the Coinage Act, 1906 as amended from time to time. The Government of India also attends to the designing and minting of our coins in various denominations. 2. RBI approves the design of the banknotes. TrueFalse. 3. Who estimates the quantity of banknotes to be printed? The Reserve Bank decides the volume and value of banknotes to be printed for us each year. The quantum of banknotes that needs to be printed, broadly depends on our requirement for meeting the demand for banknotes due to inflation, GDP growth, replacement of soiled banknotes and reserve stock requirements. The Government of India decides the quantity of our coins to be minted on the basis of indents received from the Reserve Bank. The Reserve Bank estimates the demand for banknotes on the basis of our growth rate of the economy, our replacement demand and our reserve stock requirements by using statistical modelstechniques. The Reserve Bank presently manages our currency operations through its 18 Issue offices located at Ahmedabad, Bangalore, Belapur, Bhopal, Bhubaneswar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Mumbai, Nagpur, New Delhi, Patna, Thiruvananthapuram, one sub-office at Lucknow, a currency chest at Kochi and a wide net work of currency chests.

These offices receive fresh banknotes from the banknote printing presses. We understand that the Issue Offices of RBI send fresh banknote remittances to the designated branches of commercial banks. The Reserve Bank offices located at Hyderabad, Kolkata, Mumbai and New Delhi (Mint linked Offices) initially receive the coins from the mints. These offices then send them to the other offices of the Reserve Bank. The banknotes and rupee coins are stocked at the currency chests and small coins at the Small Coin Depots(SCD). The bank branches receive the banknotes and coins from the Currency Chests and Small Coin Depots for further distribution among the public. Our banknotes and coins returned from circulation are deposited at the Issue offices of the Reserve Bank. The Reserve Bank subjects these to processing, authenticates banknotes for their genuineness, segregates them into notes fit for reissue and those which are not, for cancellation. Our banknotes which are fit for reissue are sent back in circulation and those which are unfit for reissue are destroyed by way of shredding after completion of examination process. Similarly, some of our coins received back from circulation are either reissued or are sent to the Mints for melting. 2. What happens to notes which are not fit for circulation? 3. SCD stands for ______________. To facilitate the distribution of our banknotes and rupee coins, the Reserve Bank has authorised select branches of scheduled banks to establish Currency Chests. You find that hese are actually storehouses where banknotes and rupee coins are stocked on behalf of the Reserve Bank. As on June 30, 2008, we have 4271 Currency Chests and 4033 Small Coin Depots.

The currency chest branches are expected to distribute banknotes and rupee coins to our other bank branches in their area of operation. We find that some bank branches are also authorised to establish Small Coin Depots to stock small coins. Our Small Coin Depots also distribute small coins to other bank branches in their area of operation. 2. Try to visit a Small Coin Depot in your area and see how they function. Soiled banknotes are your banknotes, which have become dirty and limp due to excessive use. You see from the follwing images how our solied notes look like. Mutilated banknotes are your banknotes, which are torn, disfigured, burnt, washed, eaten by white ants, etc. Your double numbered banknote cut into two pieces but on which both the numbers are intact is now being treated as soiled banknote. You can have a look at some mutilated notes below. All our banks are authorised to accept our soiled banknotes across their counters and pay us the exchange value. They are expected to offer this service even to non-customers. All our designated branches of commercial banks are authorised to adjudicate and pay us the value in respect of mutilated banknotes, in terms of the Reserve Bank of India (Note Refund) Rules, 1975 . The RBI has also authorised all our commercial bank branches to treat certain banknotes in ‘two pieces’ as soiled banknotes and pay the exchange value to us. All bank branches have been authorised to provide you the facility of exchanging soiled banknotes. Soiled banknotes can be exchanged by you for full value. Your payment of value of mutilated banknotes is governed by the Reserve Bank of India (Note Refund) Rules, 1975 . These Rules have been framed under Section 28 of the Reserve Bank of India Act, 1934.

You can get value for these banknotes as a matter of grace as laid down in the Rules, after adjudication. Currently, the Reserve Bank and other authorised banks have provisions for paying you either full, half or no value as far as the banknotes in the denomination for Rs.10 and above are concerned; as regards Re.1, Rs.2 & Rs.5, you can get either full or no value depending upon the condition of the banknote. The following banknotes are not payable to you under the Reserve Bank of India (Note Refund) Rules 1975. A banknote, which is. less than half the area of the full banknote devoid of the major portion of the number on an undivided area, i. e., the prefix and three digits or four digits of the number in banknotes up to and inclusive of Rs.5; in respect of banknotes of Rs.10 and above, where this inadequacy is present at both the numbering panels. cancelled by any office of the Reserve Bank or against which the value has already been paid found to be forged counterfeit deliberately cut, mutilated or tampered carrying extrinsic words or visible representation intended to convey or capable of conveying any message of a political character. 2. Notes are exchaned under______________________. 3. What type of notes are not accepted for payment under the Rules? 4. Do you have a right to claim the value of a note from RBIGovernment? YesNo. Our banknote on which the security features of genuine banknotes are not available absent can be suspected to be a counterfeit banknotes and examined minutely. Counterfeiting banknotes using as genuine, forged or counterfeit banknotes possession of forged or counterfeit banknote making or possessing instruments or materials for forging or counterfeiting banknotes making or using documents resembling banknotes are offences under Sections 489A to 489E of our Indian Penal Code and are punishable in the Courts of Law by fine or imprisonment ranging from seven years to life imprisonment or both, depending on the offence. 2.Offences regarding counterfeiting of banknotes are dealt under________________. Secuirity features are incorportated in the banknotes to help us to ascertain genuineness and to discourage forgery.

RBI has introduced new security features for the benefit of the public. Our Mahatma Gandhi series-1996 banknotes contained several special features vis-a-vis the banknotes issued earlier. These are. i. Security thread : Our Rs.10, Rs.20 and Rs.50 notes contain fully embedded security thread . Rs.100, Rs.500 and Rs.1000 banknotes contain windowed security thread . You can see this thread as partially exposed and partially embedded. When you hold it against light, you can see this thread as one continuous line. Other than on Rs.1000 banknotes, you can see that this thread contains the words 'Bharat' in the Devanagari script and 'RBI' appearing alternately. The security thread of our Rs.1000 banknote contains the inscription 'Bharat' in the Devanagari script, '1000' and 'RBI'. ii. Latent Image : The vertical band next to the (right side) Mahatma Gandhi’s portrait, contains a latent image, showing us the denominational value 20, 50, 100, 500 or 1000 as the case may be. We can see the value only when the banknote is held horizontally and light allowed to fall on it at 45° ; otherwise this feature appears only as a vertical band. iii. Micro letterings : This feature appears between the vertical band and Mahatma Gandhi portrait. You will find that it contains the word ‘RBI’ in Rs.10. Our notes of Rs.20 and above also contain the denominational value of the banknotes. This feature can be seen by us better under a magnifying glass. iv. Identification mark : A special intaglio feature (raised printing) has been introduced on the left of the watermark window, on the obverse (front) on all banknotes except Rs.10- banknote.

This feature is in different shapes for various denominations (Rs.20-Vertical Rectangle, Rs.50-Square, Rs.100-Triangle, Rs.500-Circle, Rs.1000-Diamond) and helps the visually impaired to identify the denomination. v. Intaglio Printing : You will find that the portrait of Mahatma Gandhi, Reserve Bank seal, Guarantee and promise clause, Ashoka Pillar Emblem and RBI Governor's signature are printed in intaglio i. e. in raised prints in Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000 banknotes. vi. Fluorescence : The number panels of the banknotes are printed in fluorescent ink. Our banknotes also have optical fibres. You can see both when the banknotes are exposed to ultra-violet lamp. vii. Optically Variable Ink : The numeral 500 & 1000 on the Rs.500 revised colour scheme of mild yellow, mauve and brown and Rs.1000 banknotes are printed in Optically Variable Ink viz., a colour-shifting ink. You can see that the colour of these numerals appears green when the banknotes are held flat but you would find them change to blue when the banknotes are held at an angle. viii. Watermark : Our banknotes also contain the Mahatma Gandhi watermark with a light and shade effect and multi-directional lines in the watermark window. The additional new security features in MG Series 2005 banknotes. i. Security Thread : The machine-readable security thread in Rs.10, Rs.20 and Rs.50 denomination banknotes is windowed on front side and fully embedded on reverse side. You will find that the thread fluoresces in yellow on both sides under ultraviolet light.

The thread appears as a continuous line from behind when you hold up against light. ii. Our Rs.100, Rs.500 and Rs.1000 denomination banknotes have machine-readable windowed security thread with colour shift from green to blue when you view from different angles. You can see that it fluoresces in yellow on the reverse and the text will fluoresce on the obverse under ultraviolet light. iii. Intaglio Printing : In this we find that the portrait of Mahatma Gandhi, Reserve Bank seal, Guarantee and promise clause, Ashoka Pillar emblem, Governor's signature and the identification mark for the visually impaired persons are printed in improved intaglio. iv. See through register : Half the numeral of each denomination (10, 20, 50, 100, 500 and 1000) is printed on the obverse (front) and half on the reverse. The accurate back to back registration makes the numeral appear as one when viewed against light. v. Water Mark and electrotype watermark : The portrait of Mahatma Gandhi, the multi-directional lines and an electrotype mark showing the denominational numeral 10, 20, 50, 100, 500 and 1000 appear in this section respectively in each denomination banknote and these can be viewed better when you banknote is held against light. vi. Optically Variable Ink (OVI): The font size of the numeral 500 and 1000 in Rs.500 and Rs.1000 denomination banknotes is reduced, as compared to MG series banknotes issued in these denominations earlier in the year 2000. You will see that the colour of the numeral appears green when the banknote is held flat but it would change to blue when you hold the banknote at an angle.

vii. Dual coloured optical fibres , You can see under UV lamp. viii. Year of Printing: You can see the year of printing on the reverse of the banknote. Inorder to see the above security features in detail you can also click on the RBI link alongside to see them more elaborately.1



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