The Paper Currency Act, 1861 is an act in India dating from the

British colonial rule The British Empire was composed of the dominions, colonies, protectorates, mandates, and other territories ruled or administered by the United Kingdom and its predecessor states. It began with the overseas possessions and trading posts est ...

, that is currently no longer in force.

Background

Before the passing of the Act, there were a number of commercial banks in India which issued their own banknotes to the general public. Some of these commercial banks included: * The

General Bank of Bengal and Bihar The General Bank of Bengal and Bihar (alternate spelling: ''General Bank of Bengal and Bahar'') was a bank founded in the year 1773 in British India. The bank was the fourth oldest bank in India. The bank became defunct March 31st, 1775. Hist ...

* The Bank of Hindostan, which had been set up by the Alexander and Co. agency house The

East India Company The East India Company (EIC) was an English, and later British, joint-stock company founded in 1600 and dissolved in 1874. It was formed to trade in the Indian Ocean region, initially with the East Indies (the Indian subcontinent and South ...

, which then ruled over large parts of India, wanted to take away this power of issuing banknotes from the commercial banks, as a result of which The Paper Currency Act, 1861 was enacted into law.

Tenets and Precepts

After the enactment of the Act, the

government became the sole issuer of banknotes in India. The three Presidency Banks of India became the issuer of banknotes on the behalf of the

: *

Bank of Calcutta The Bank of Calcutta (a precursor to the present State Bank of India) was founded on 2 June 1806, mainly to fund General Wellesley's wars against Tipu Sultan and the Marathas. It was the first bank of India and was renamed Bank of Bengal on ...

Bank of Bombay The Bank of Bombay was the second of the three presidency banks (others being the Bank of Calcutta and the Bank of Madras) of the Raj period. It was established, pursuant to a charter of the British East India Company, on 15 April 1840. The b ...

Bank of Madras The Bank of Madras was one of the three Presidency Banks of British India, along with the Bank of Bengal and the Bank of Bombay. It was established on 1 July 1843 through the amalgamation of a number of existing regional banks and headquartere ...

Repealment

Just a few years before the Independence of India, the

Reserve Bank of India Act, 1934 Reserve Bank of India Act, 1934 is the legislative act under which the Reserve Bank of India was formed. This act along with the Companies Act, which was amended in 1936, were meant to provide a framework for the supervision of banking firms in ...

was passed which effectively repealed The Paper Currency Act, 1861. From now onwards, the

Reserve Bank of India The Reserve Bank of India, chiefly known as RBI, is India's central bank and regulatory body responsible for regulation of the Indian banking system. It is under the ownership of Ministry of Finance, Government of India. It is responsible f ...

became the sole issuer of banknotes in India.

References

{{Reflist

External links

The Text of the ActInterpretation of the Act by Reserve Bank of IndiaHistory of the ActFurther Amendments to the Act
Law of India 1861 in law Negotiable instrument law Legislation in British India 1861 in British law 1861 in India