BARTER SYSTEM FUNCTIONS OF COMMODITY METALLIC MONEY

1. Double Coincidence of MONEY MONEY Stamped gold nuggets using

wants PRIMARY  Both intrinsic and dye.
2. High Search and Measure of Value extrinsic value. Indo Greek and Kushana
Transaction Cost As a medium of exchange  Perishable, non- Kings- Issued Gold Coins
3. Perishable in transaction uniformity, Gupta Gold Coins: Most
CommoditiesLoose SECONDARY internationally spectacular
value with time. Store & transfer of value unaccepted, non-purity & Delhi Sultanate Kings:
4. No specialisation & Deferred Payments division of labour not Silver Tanka
division of labour CONTINGENT promoted. Sher Shah Suri: Rupiyah
5. Fungibility Problems Basis of Credit System,  Iron nails, cocoa beans, Silver Coin
(Division: Yes; Mutual Financial Markets Akbar: Muhr
gold nuggets etc.
Substitution: No) Redistribution of National
Income
FULL BODIED COINS POOR QUALITY TOKEN COINS MODERN INDIAN
GUPTA COIN- 8g GOLD COINS 50 PAISA MODERN COINS
Intrinsic Value> Face Decrease in Roman- COIN- 4g STEEL Cupronickel metal used
Value Persian Empires lead to Intrinsic Value< Face to discourage the
DEBASEMENT: decrease in incoming Value melting.
decreasing the amount of gold. Tughlaq’s Token Coin Coinage Act 2011
metal in the coins. Experimentation: (not the
Trade was done for prohibits melting of
first to be introduced- China
Usually happen when species, pepper, silk and and Iraq issue paper money coins
king’s treasury gets sandalwood from India. first)
poor. Thus, lead to formation Hoarding of coins for metal
E.g. Aurangzeb, Roman of poor quality coins. Thomas Gresham’s Law-
Kings Bad money drives out good
money.
 PAPER/ TOKEN/ LEGAL TENDER G-Sec, T-Bills, Shares, COINS in INDIA
REPRESENTATIVE Fiat money is legally Bonds, Demand Draft, Government issues with
MONEY valid for all debts & Cheque, ATM, Cards, powers of Coinage Act
Possess no intrinsic transactions throughout Bitcoins are neither Fiat all coins upto Rs.1000
value the country. money nor Legal Tender
FIAT MONEY FIDUCIARY MONEY Rupee 1 note signed by
 Form of a coin/ currency People kept money with Financial Secretary.
note/ sometimes virtual merchant and merchant
crypto-coin provided a token. Rupee 1 does not
 Issued by order of a Commemorative Coins: contain “I promise to
King/ Queen/
Fiat: Yes; Legal Tender: pay the bearer..”
Government/ Central
Bank No, until specified
CURRENCY NOTES in MEANING OF MODERN ERA LIMITED LEGAL
INDIA PROMISE CURRENCY NOTES TENDER
RBI issues with the COLONIAL ERA Zero Interest  Payment beyond a
power of RBI Act, 1934 Converted to gold/ silver Bond/ Promissory Note limit can be refused.
all currency notes other worth the equal value in Anonymous Bond E.g. Coins
than Rupee 1. weight. Bearer.  Coinage Act 2011
MODERN ERA  Rs.1 or above coins
They are signed by RBI Converted to other token CURRENCY NOTES upto Rs. 1000
Governor notes of equal face FEATURES  50 paisa upto Rs. 10
value. 2000= 500 x 4 Read from handout.  Below 50 paisa
Currency notes contain Not linked with gold. withdrawn
“I promise to…” Not inflation adjusted.
 UNLIMITED LEGAL DEMONETISATION SPECIFIED BANK BANK MONEY/
TENDER OF FIAT MONEY NOTES (CESSATION DEPOSIT MONEY
 No such restrictions  1946, 1978, OF LIABILITIES ACT,  Paper orders: Cheque,
under RBI Act, 1934 8/11/2016 2017) Demand Draft.
 RBI Act, 1934-  Gazette notification-  RBI not to honour “I  Viceroy Ripon’s
Section 26: Every Finance Minister- promise…” on Negotiable
Bank Note is a legal Department of banned notes Instruments Act 1881:
tender in India. Can Economic Affairs  Old notes cannot be Encourage Check usage
settle any amount.  Banned “Specific stores except for & punish dishonour and
 Financial Act 2017: Cash Bank Notes” of research, museum etc. forgery.
transaction for less than Rs. that too in limited Dishonour: Insufficient
Mahatma Gandhi Series
2 lakhs only quantity. money in drawer’s account.

BANK MONEY/ BANK MONEY/ AUTOMATIC TYPES OF CHEQUE

DEPOSIT MONEY DEPOSIT MONEY CLEARING SYSTEM  Stale: Not withdrawn
 2017 Amendment:  Indian Financial 1) Optical Character in 3 months
20% interim System Code (IFSC): Recognition (OCR)  Anti-dated: Before a
compensation @ Trial 11 alphanumeric 2) MICR Code: Magnetic specific date
Court. numbers to identify bank Ink Character  Post-dated: After a
20% deposit before branch. Recognition. 9 digit code specific date
appeal in higher court  Demand Draft: Sender written in iron oxide ink.
 Open/ Bearer Check:
3 parts in cheque: has to pay before bank 3) CTS: NPCi’s Cheque If no crossing anyone
issues, thus, cannot be Truncation system:
1) Drawer (Sender) dishonoured.
can withdraw.
2) Drawee (Bank) scanned image If crossing Money will
 Over Draft: Zero balance electronically sent. No only be sent to Payee’s
3) Payee (Recipent) but still withdraw as a loan theft and tempering. Account and no cash.
Middleman for Financial RBI FORMATION RBI FORMATION July, 1935: Banks to
Transactions b/w 1913: Commercial Banks 1934: RBI ACT enacted register  2nd Schedule
registered under of RBI ACT
Lender  Borrower COMPANIES ACT st
1935: 1 April RBI CRR to be maintained.
No bound of reserve. OPERATED
Investor  Entrepreneur 1943-49: CD Deshmukh.
1926: HILTON YOUNG 1st Indian Governor RBI
Governor: OSBORNE
Household Business Firm COMMISSION (Royal) 2nd FinMin
SMITH
recommended to set up RBI
Is known as: Viceroy: WILLINGTON
1948-49: GOI bought pvt.
Financial Intermediary 1929: Great Depression in shares under RBI transfer
Types: * Formal & USA, collapsed 450+ banks Low government ownership of OWNERSHIP ACT,
* Informal in India
1948 (RBI Parliament)
BANKING RBI CENTRAL RBI CENTRAL RBI CENTRAL
REGULATION ACT, BOARD BOARD BOARD
1949 COMPOSITION COMPOSITION COMPOSITION
RBI empowered Official Directors: Appointed by Financial Non Official Directors:
 LicenseCompanies  RBI Governor-25th- Sector Regulatory  2 Govt. Officials
New Bank Shaktikanta Das Appointment Search  10 Directors nominated
 Permission  Bank   Max 4 Dy. Governor Committee (FSRASC) by Govt.
New Branch under SECTION 8 of headed by Cabinet  4 Directors: RBI’s Local
 SLR RBI ACT Secretary IAS headed by Boards:
 Interest of depositors  BP Kanungo PM. N-S-E-W
Force elimination/  Mahesh Kumar Jain Delhi-Chennai-Kolkata-
merger of weak banks Tenure: 3 years, Mumbai
 Michael Patra
 ……………. Reappointment Possible
 RBI DEPARTMENTS RBI FUNCTIONS
1/04/17 Enforcement  Controls Money Supply:
Department of RBI to M0
take centralized actions  Controls Foreign
against violators. Exchange: FEMA
 Banker to govt. & public
Not to be confused with debt
FinMin Enforcement  Regulator of Banks &
Directorate uses FEMA NBFC under Banking
(Foreign Exchange Regulation Act, 1949 &
Management Act 1999), Payments System, 07
Prevention of Money  Ombudsman, PSL
Laundering Act, 2002 Norms: Protect Public