THE SILVER STANDARD AND THE DISLOCATION OF ITS PARITY 383
been exercised by any of the banks on any very large scale, not even by the Presidency Banks,* and was taken away from all in 1861,† when there was established a national issue for the whole of India entrusted to the management of a Government Department called the Department of Paper Currency. But if private interest was not allowed to play the same part in determining the quantity of paper currency as was the case with regard to metallic currency, neither was any discretion left to the Government Department in the regulation of the paper currency. The Department of Paper Currency had no more discretion in the matter of paper currency than the Mint Master had in the matter of metallic currency.
The Department’s duty was confined by law‡ to the issue of notes in exchange for the amount thereof: (1) in current silver coin of the Government of India; (2) in standard silver bullion or foreign silver coin computed according to standard at the rate of 979 rupees per 1,000 tolas of standard silver fit for coinage ;
(3) in other notes of the Government of India, payable to bearer on demand of other amounts issued within the same circle ; and
(4) in gold coin of the Government of India, or for foreign gold coin or bullion, computed at such ratio and according to such rules and conditions as may be fixed by the Governor-General, provided that the notes issued against gold did not exceed onefourth of the total amount of issues represented by coin and bullion. The whole of this amount was required by law to be retained as reserve for the payment of notes issued with the exception of a fixed amount which was invested in Government securities, the interest thereon being the only source of profit to the Government. The limit to the sum to be so invested was governed “by the lowest amount to be estimated to which
- It should however, be noted that in 1860 the circulation of notes of the three Presidency banks was larger than their current accounts, as is evident from the following :—
Accounts Notes in Name of the Bank current circulation
Bank of Bengal £ 1,254,875 £ 1,283,946
Bank of Bombay 438,459 765,234
Bank of Madras 161,959 192,291
(Bankers’ Magazine, April, 1893, p. 547)
† For a summary of the controversy re.Bank issue v. Government issue, see Report of the Bombay Chamber of Commerce for 1859-60, Appendix L, pp. 284-318.
‡ Sect. IV of Act XIX of 1861.