Section I of Act Xvii of 1835. This Act Had Also Authorized

the issue of a silver coin called “Double Rupee,” but this was discontinued by Section II of Act XIII of 1862, which substituted in its place the silver coin No. iv. (c) Copper Coins. (i), (ii), and (iv) were first authorized by Section I of Act XXI of 1835, which, however, restricted their circulation to the Presidency of Bengal. They were afterwards universalized for the whole of India by Act XXII of 1844. Coin No. (iii) was first introduced by Section II of Act XI of 1854.

TABLE VIII

───────────────────────────────────────────────────────────────────────── Denomination Gross Remedy Fineness Remedy Legal-tender of Coins Wt. in Troy in power issued by the Troy Weight Grs. Fineness. Mint. Grs. ───────────────────────────────────────────────────────────────────────── I. Gold Coins (a) ───────────────────────────────────────────────────────────────────────── (i) Mohur 180 2 ⁄ 165 2 ⁄ 1000ths 1000ths ──────────────────────────────────────────────────────── (ii) Third of 60 2 ⁄ 65 2 ⁄ a Mohur 1000ths 1000ths ──────────────────────────────────────────────────────── Not Legal (iii) 120 2 ⁄ 110 2 ⁄ Tender at all. Two-thirds of 1000ths 1000ths a Mohur ──────────────────────────────────────────────────────── (iv) Double 360 2 ⁄ 330 2 ⁄ Mohur 1000ths 1000ths ───────────────────────────────────────────────────────────────────────── II. Silver Coins (b) ───────────────────────────────────────────────────────────────────────── (i) Rupee 180 5 ⁄ 165 2 ⁄ 1000ths 1000ths Unlimited ──────────────────────────────────────────────────────── Legal Tender (ii) 90 5 ⁄ 82·5 2 ⁄ Half-rupee 1000ths 1000ths ───────────────────────────────────────────────────────────────────────── (iii) 45 7 ⁄ 41·25 3 ⁄ Legal Tender Quarter-rupee 1000ths 1000ths for Fractions ──────────────────────────────────────────────────────── of a Rupee (iv) Eighth 22·5 10 ⁄ 20·625 3 ⁄ only. of a Rupee 1000ths 1000ths ───────────────────────────────────────────────────────────────────────── III. Copper Coins (c) ───────────────────────────────────────────────────────────────────────── (i) Pice 100 1 ⁄ — — Legal Tender 40th for \frac{1}{64}th part of a Rupee. ───────────────────────────────────────────────────────────────────────── (ii) Double 200 1 ⁄ — — Legal Tender Pice 40th for \frac{1}{32}nd part of a Rupee. ───────────────────────────────────────────────────────────────────────── (iii) 50 1 ⁄ — — Legal Tender Half-pice 40th for \frac{1}{128}th part of a Rupee. ───────────────────────────────────────────────────────────────────────── (iv) Pie 33·3 1 ⁄ — — Legal Tender 40th for \frac{1}{192}nd part of a Rupee. ─────────────────────────────────────────────────────────────────────────

The Act made no innovations either in regard to the number of coins issued by the Mints or their legal-tender powers. Identical though it was with the earlier enactments in the matter of coins,⁹⁷ its juridical provisions were designed to perfect the monetary law of the country as had never been done before. The former Acts which it repealed were [pg 51] very sparing in their recognition of the principle of mint “remedy” or “toleration,” as it is called. The point has been largely deemed to be one of mere mint technique. That is so; but it is not without its monetary significance. When the precious metals were current by weight the question of a mint toleration could not possibly have arisen, for it was open to every one to ascertain the same by weighing the value of his return. But since the invention of coinage, when currency came to be by tale, every one has trusted that the coins contained the value they were certified to contain. The actual value of the coin cannot, however, always be in exact agreement with its certified value. Such differences are bound to exist, and even with all the improvements in the art of coinage it would be difficult to avoid them. What matters is the extent of the deviation from the true mint standard. The mint laws of all countries, therefore, contain provisions which declare that coins shall not be legal tender at their certified value if they err from their legal standard beyond a certain margin. Indeed, to make coins legal tender without prescribing a limit to their toleration is to open a way to fraud. In so far as the Act laid down a limit of toleration to the coins it authorized to be issued from the Mint, it was a salutary measure. It is to be regretted, however, that the Act instituted no machinery with which to ascertain that the coinage conformed to the law.⁹⁸ Another important improvement made by the Act was the recognition of the principle of free coinage. The principle, though it has not received the attention it deserves, is the very basis of a sound currency in that it has an important bearing on the cardinal question of the quantity of currency necessary [pg 52] for the transactions of the community. Two ways may be said to be open by which this quantity can be regulated. One way is to close the Mint and to leave it to the discretion of the Government to manipulate the currency to suit the needs. The other is to keep the Mint open and to leave it to the self-interest of individuals to determine the amount of currency they require. In the absence of unfailing tests to guide the exercise of discretion necessary in the case of closed Mints, the principle of open Mints has been agreed upon as the superior of the two plans. When every individual can obtain coin for bullion and convert coin into bullion, as would be the case under open Mints, the quantity is automatically regulated. If the increasing demands of commerce require a large amount of circulating medium, it is for the interest of the community to divert a larger quantity of its capital for this purpose; if, on the contrary, the state of trade is such as to require less, a portion of the coin is withdrawn, and applied as any other commodity for purposes other than those of currency. Because the Act of 1870 expressly recognized the principle of open Mint, it is not to be supposed that the Mints were closed before that date. As a matter of fact they were open to the free coinage of both gold and silver, although the latter alone was legal tender. But, strange as it may seem, none of the earlier Acts contained a word as to the obligation of the Mint Master to coin all the metal presented to him—a condition which is of the essence of the open mint system. The provisions of the Act on this point are unmistakable. It required:—

⁹⁸ This machinery is provided in England by what is known as the “Trial of the Pyx.” For a history of this institution and the way it functions, cf. H. of C. Return 203 of 1866. During the time of the East India Company the maintenance of the standard purity of the Indian coins always formed a most anxious concern of the Court of Directors. The coins of Indian mintage were regularly required to be sent over to England, where they were tested at a special Trial of the Pyx and the verdict reported back for the future guidance of the Mint Masters in India. Cf. H. of C. Return 14 of 1849. Since the winding-up of the Company there is no machinery to bring the Mint Masters to book.

“Section 19. Subject to the Mint-rules for the time being in force, the Mint Master shall receive all gold and silver bullion and coin brought to the Mint:

“Provided that such bullion and coin be fit for coinage;

“Provided also that the quantity so brought at one time by one person is not less, in case of gold, than fifty tolas, and, in the case of silver, than one thousand tolas.

“Section 20. A duty shall be levied at the rate of one rupee per cent. at the Mint on the produce of all gold bullion and on all gold coin brought for coinage to the Mint in accordance with the said Mint-rules. [pg 53]

“Section 21. All silver bullion or coin brought for coinage to the Mint, in accordance with the said Mint-rules, shall be subject to a duty at the rate of 2 per cent. on the produce of such bullion or coin, and the amount of such duty shall be deducted from the return to be made to the proprietor.

“Section 22. A charge of one-fourth per mille on gold bullion and coin, and of one per mille on silver bullion and coin, shall also be levied for melting or cutting such bullion and coin so as to render the same fit for receipt into the Mint.

“Section 23. All gold and silver bullion and coin brought to the Mint for coinage, and which is inferior to the standard fineness prescribed by this Act, or which, from brittleness or other cause, is unfit for coinage, shall, in case it is refined, be subject, in addition to the duty and charge aforesaid, to such charge on account of the loss and expense of refining as the Governor-General in Council prescribes in this behalf.

“Section 24. The Mint Master, on the delivery of gold or silver bullion or coin into the Mint for coinage, shall grant to the proprietor a receipt which shall entitle him to a certificate from the Assay Master for the net produce of such bullion or coin payable at the General Treasury.

“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 current 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 in 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 revenue⁹⁹—a privilege for which the Presidency banks had to submit to a stringent legislative control [pg 54] on their business¹⁰⁰ from which other banks whose issues were not so privileged 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 been exercised by any of the banks on any very large scale, not even by the Presidency Banks,¹⁰¹ and was taken away from all in 1861,¹⁰² when there was established a national issue for [pg 55] 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.

⁹⁹ Cf. F. C, Harrison, Economic Journal, 1891, Vol. I, p. 726.

¹⁰⁰ The reasons 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 foreign-exchange 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.

¹⁰¹ 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:—

─────────────────────────────────────────────────── Name of the Bank Accounts Notes in in 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.) ───────────────────────────────────────────────────

¹⁰² For a summary of the controversy re Bank issue v. Government issue, see Report of the Bombay Chamber of Commerce for 1859–60,