Whenever there is talk about inflation, unemployment or economic challenges in India, a question definitely arises in the minds of the general public. When the power to print currency is with the Reserve Bank of India i.e. RBI, then why are as many notes not printed in the country as they want? After all, why doesn’t the government make everyone’s life easier by giving them money? Today we have brought the answer to this question in simple language.
First of all, it is important to understand that RBI is the Central Bank of India, which was established in 1926 on the suggestion of the Royal Commission on Indian Currency and Finance. This commission is also known as Hilton Young Commission. Initially RBI was a private bank, but in 1949 it was nationalized and made the central bank of India. Since then, RBI is managed under the Ministry of Finance of the Government of India.
What is the responsibility of RBI?
RBI not only has the right to print money, but its main objective is to maintain public confidence in the country’s economy, protect the interests of depositors and run an economical banking system in the country. Apart from this, RBI maintains monetary stability, manages government bonds and foreign exchange reserves and controls currency issues of India.
Can RBI print billions of rupees if it wants?
Many people think that if RBI has currency printing machines, then why does it not print unaccounted notes, the answer to this question is – legal rules and balance of the economy. The work of currency printing in India is divided into two parts. The first is that the minting of coins is done by the Indian government and the second is that the responsibility of note printing is done by RBI.
Under the Coinage Act 1961, only the Government of India has the right to make coins, but the currency notes are printed by the RBI.
Why is there a limit on note printing?
RBI cannot print unlimited currency because note printing in India is based on ‘Minimum Reserve System’. This law is in force since 1957. Under this, RBI always has to keep assets worth at least ₹ 200 crore in reserve.
Out of these 200 crores, ₹15 crores must be in the form of gold and ₹85 crores must be in the form of foreign currency. This reserve is the guarantee of the Indian currency. Notes are printed on the basis of this value.
On every Indian note, a promissory line is written on behalf of the RBI Governor – “I undertake to pay this amount to the bearer.”
This line means that RBI maintains gold or foreign assets equal to the value of the note. If RBI prints more notes than its reserves, then it will not have gold and foreign reserves left to pay the price of those notes. In this situation the country may sink into economic crisis.
Where are notes printed?
Currency printing in India is done in four printing presses. Dewas (Madhya Pradesh), Nashik (Maharashtra), Mysore (Karnataka)
Salboni (West Bengal). Dewas and Nashik are government presses, while Mysore and Salboni are controlled by the RBI.
At the beginning of every year, RBI decides how many notes will be required. For this, he prepares the data of useless notes, damaged notes and market demand last year. Then, together with the Finance Ministry, it is decided how many notes will be printed this year.
What will happen if unlimited notes are printed?
The biggest problem that will arise from this is inflation. Due to the flood of notes in the country, people will have more money, but the goods in the market will be limited. The result will be that prices will increase rapidly.
Suppose you distribute one lakh rupees to everyone, then milk will become expensive, pulses will become expensive.
House prices will increase, cars will be sold at double the price and gradually the same notes will become worthless.
Many countries in the world have done this like Zimbabwe and Venezuela, where people had to carry bags full of notes to buy bread.
Can RBI print bigger notes if it wants?
Notes up to ₹ 10,000 can be printed in India. To print notes above this, it is necessary to amend the law. Printing unlimited notes may prove to be not a profitable deal for the country but a dangerous step.
If RBI prints as many rupees as it wants, the gold reserves will be depleted, the rupee will become weak in the world, people will lose confidence in the currency, inflation will skyrocket and economic crisis may occur.
That is why RBI prints notes in balanced quantities only on the basis of reserves, gold and foreign currency. To run the country, it is not enough to just print notes, but it is important to maintain economic balance.
