Hello Gomig

The RBI follows a minimum reserve system in the note issue. Initially, it used to keep 40 per cent of gold reserves in its total assets. But, since 1957, it has to maintain only Rs. 200 crores of gold and foreign exchange reserves, of which gold reserves should be of the value of Rs. 115 crores. As such, India has adopted the “managed paper currency standard.”

As a currency authority, the Reserve Bank provides different denominations of currency for facilitating the transactions of the Central and State Governments, and caters to the exchange and remittance needs of the public, banks as well as the government departments.

The bank has established 14 offices of the Issues Department for the discharge of its currency functions. At all the other centres of the country, the currency requirements are met by the bank through currency chests. Currency chests are maintained by the bank with the branches of the SBI group, Government Treasuries and Sub-Treasuries, and public sector banks.

Currency Chest :

A currency chest is a pocket edition of the Issue Department. The stock of notes and coins kept in the currency chests varies as per the needs of the respective areas served by the Treasury or an agency of the bank.

The following advantages are claimed for maintaining currency chests by the bank:

1. The currency chests provide remittance facilities to banks and the public.

2. They facilitate Treasuries and bank branches to function by keeping relatively small cash balances.

3. They facilitate the exchange of rupee coins for notes, as well as the issue of new for old/soiled notes.

Above all, the Banking Department of the Reserve Bank manages seasonal variations in currency circulation. In the busy season, the currency flow is expanded, in the slack season, it is contracted. During the busy season when there is an increased demand for cash from the public.

It is first reflected in the depletion of the cash balances of the commercial banks and through them in the cash balances of the Banking Department. The Banking Department then transfers eligible securities to the Issue Department, on the basis of which the Issue Department issues more currency notes. This is how the currency expansion takes place. During the slack season, the process is reversed.

Hope that's helpful

Best of luck

Reserve bank of India has the sole right to issue any currency note in India. They can issue any Indian currency note except the one rupee note because one rupee note is issued only by Ministry of Finance. RBI follows the system of minimum reserve system for the note issue procedure.

Hello,

The Reserve Bank of India(RBI) issues notes under the fixed minimum reserve system . RBI has been following this system since 1956. Under this System, the RBI is required to keep a minimum reserve of Rs 200 crore comprising of gold coin and gold bullion and foreign currencies. Out of these total Rs 200 crores, Rs. 115 crore should be in the form of gold coins or gold bullion. The main purpose of using this system is to expand money supply to meet the needs of increasing transactions in the economy.

Hope this help!