382 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES
“Section 25. For all gold bullion and coin, in respect of
which the Assay Master has granted a certificate, payment
shall be made, as nearly as may be, in gold coins coined
under this Act or Act No. XVII of 1835 ; and the balance
(if any) due to the proprietor shall be paid in silver, or
in silver and copper, coins, in British India.”
In the matter of paper currency the Government, it is to be noted, did not proceed upon the principle of freedom of issue, which then obtained in the country. There prevails the erroneous view that before the introduction of the Government paper currency the right of note issue was confined to the three Presidency banks of India. As a matter of fact there existed in India what is called the free banking system, in which every bank was at liberty to issue its notes. It is true that notes of the Presidency banks enjoyed a status slightly superior to that enjoyed by the notes of other banks in that they were received by the Government to some extent in payment of revenue*— a privilege for which the Presidency banks had to submit to a stringent legislative control on their business,† from which other banks whose issues were not so priviliged were immune. But this disadvantage was not sufficient to discourage other banks from indulging in the right of issue which was left open to them by law. However, this freedom of issue does not seem to have
- Cf. F. C. Harrison, Economic Journal, 1891, Vol. I, p. 726.
†The reaosns for such control are to be found in the peculiar relationship that subsisted between the Government and the Presidency banks. Prior to 1862, as a safeguard against their insolvency, “the Presidency Bank Charters restricted the kind of business in which they were to engage themselves. Put very briefly the principal restrictions imposed prohibited the banks from conducting foreignexchange business, from borrowing or receiving deposits payable out of India, and from lending for a longer period than six months, or upon mortgage, or on the security of immovable property, or upon promissory notes bearing less than two independent names, or upon goods unless the goods or title to them were deposited with the banks as security. The Government held shares in the banks and appointed a part of the Directorate. In 1862, when the right of note issue was withdrawn, these statutory limitations on the business of the banks were greatly relaxed, though the Government power of control remained unchanged. But, the banks having in some cases abused their liberty, nearly all the old restrictions of the earlier period were reimposed in 1876 by the Presidency Banks Act, Government, however, abandoning direct interference in the management, ceasing to appoint official directors, and disposing of its shares in the banks. Some of these limitations have been incorporated in Act XLVII of 1920, which amalgamated the three Presidency banks into the Imperial Bank of India. Banks other than Presidency banks have been entirely immune from any legislative control whatsoever, except in so far as they are made amenable to the provisions of the Indian Companies Act. Cf. in this connection Minutes by Sir Henry Maine, No. 47, and the accompanying note by W. Stokes. The control of these banks is one of the important problems of banking legislation in India.