The Modi Government’s 2016 demonetisation move may still be creating headlines, but did you know that the very first currency note was issued in India in the late 18th century by the Bank of Bengal, as the Mughal Empire was collapsing. And, it looked like nothing you would have ever come across. Today these first few notes are so rare that they are prized collectors’ pieces. Each can sell for lakhs.
In India, until the late 18th century, coins ruled. For long distance transactions there was also the time tested system of hundis or bills of exchange, driven by networks of trust, that ensured that a cargo picked up in Calcutta, could be paid for in far off Jhunjhunu, in Rajasthan.
While that continued well into the 20th century, it was only with British control in Bengal from 1760s onwards, that the idea of introducing paper currency was mooted. This was in response to the chaotic economic situation prevailing across north India at the time.
The expansionist policies of the British East India Company had led to a shortage of gold and silver bullion in Bengal. Faced with a looming credit crisis, the British decided to introduce paper currency, to ensure payments to its employees living in far flung areas.
The saga of India’s first currency note, is interesting.
Initially, the notes were issued by private banks, but they were very different to what we take for granted today. The earliest notes, were issued by the Bank of Hindostan (1770-1832), the General Bank in Bengal and Behar (1773-75), established by Warren Hastings), and the Bengal Bank (1784-91). However, the East India Company government did not officially recognise the legality of these banknotes and they remained private promissory notes, thus restricting their use. Not surprisingly, these were non starters and even in 1832, when the 3 banks closed down, due to financial mismanagement, there were very few notes in circulation.
The failure of these banks couldn't have come at a worse time for the British East India Company, for it needed funds to finance wars against Tipu Sultan and later as well. The East India Company was forced to step in and set up a new bank- The Bank of Calcutta (1806), which was later renamed the Bank of Bengal in 1809. Around 20% of the capital was invested by the government which gave it the right to nominate 3 directors on its board. This new Bank of Bengal was given the right to issue currency notes.
In fact the Bank issued its own banknotes for a total value of one crore (ten million) sicca rupees. It got its name from the Sicca ruppee coins, the version of Indian rupee minted by the British East India Company, in the territories under its control. From 1833, the Bank of Bengal was also authorised to make civil and military payments in all Presidency towns and villages. The fact that the bank was a semi-government entity meant that the Bank of Bengal notes were far more widely circulated and accepted than those of the other banks, before.
Interestingly, these early notes were more in the nature of ‘Promissory notes’ paying an interest of 10-20% per annum. Amazing as it sounds, the notes were cut in half with one half despatched by post for security reasons. The remaining half, was sent following the acknowledgment of a receipt. Once both halves were received, they were joined together and presented for the exchange of silver rupee coins, of the equivalent value. Following the fulfilment of the promise, the note was marked ‘cancelled’ and the signature portion torn to prevent reuse. The note was retained, but only for accounting purposes.
The oldest surviving Indian banknote is the Bank of Bengal note issued in 1812. . This note is seen in the book ‘The Standard Reference Guide to Indian Paper Money’ by Rezwan Razack & Kishore Jhunjhunwalla published in 2012. But it has not yet appeared at auctions.
The notes issued by Bank of Bengal (1809 – 1864) can be categorized into three series, the Unifaced series, Commerce Series and Britannia Series. The early issues were the unifaced notes where only one side of the note was printed. They carried the value of one gold mohur and were in denominations of Rs. 100, Rs. 250, Rs. 500, etc. Later on, notes known as Commerce Notes were issued which bore a vignette of a female figure personifying 'commerce'. Unlike the earlier uniface notes, these ones were printed on both sides.
Towards the end of the 19th century, 'Commerce' was replaced by 'Britannia’ to prevent forgery or any other kind of illicit activities, the new banknotes had more features and complex designs. These notes were popularly termed as notes belonging to the Britannia series. The denomination of the notes were, Rs. 10, 15, 16, 20, 25, 50, 100, 250, 500, 1000 and 10,000
Recently at an auction by Classical Numismatics Gallery in May, 2018, an extremely rare note of the ‘Britannia series’ was auctioned for Rs 9 lakhs. However, this 25 rupees note was unifaced without any date and signature. On the note was the motif of Britannia with a lion accompanied by the ‘image’ of 'Commerce' on the left, 'Trade' on the right, and 'Agriculture' near the feet. One can also spot in a straight line - a Rhinoceros (Assam), a steamboat and a sailboat on the river Hooghly (Bengal), Tomb of Shershah Suri at Sasaram (Bihar) and an Elephant (representing the remaining provinces).
The note auctioned is however extremely rare as it is uncut and seems to be incomplete without the serial number, signature or date.
The second Presidency Bank was established in 1840 in Bombay, which had developed as a major commercial centre by then. Notes issued by the Bank of Bombay carried the vignettes or images of the Town Hall and others, the statues of the Governors of Bombay, Mountstuart Elphinstone and John Malcolm. In 1843, the Bank of Madras came up and the three banks formed the apex of the banking system in British India and were also responsible for issuing paper currency.
In 1862, the Government of India assumed sole charge of printing paper currency and the three banks, as bankers to the government, were mandated to manage and circulate the new currency. In 1921, the government amalgamated the three Presidency banks to form the Imperial Bank of India. After Independence, in 1955, several state-owned banks were merged with the Imperial Bank of India to form the State Bank of India in 1955
Today, the Bank of Bengal notes are highly prized by collectors… However, the notes are rarely seen as they are only in private collections. They sometimes surface during auctions.
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