Money and Banking system





Now we will understand the compounding power and magic of money which is managed by Bank. which makes us and keep us slave. which control money supply. it is been always taught in Economies that money supply is based on Gold standard and the theory of Demand and Supply of Goods and Services. But Gold standard money monetary system has been ended  in 1933 due to some reason. Now money supply is under Banks control. it is controlled by central. in India, it is Reserve Bank of India. on Reserve Bank of India also there are Banks. which control all over world's Central Bank. but here we must know that Banks are not fully under Government. or we can say semiprivate institution but  Banks are independent from Government. In India, Reserve Bank of India can issue all value of Notes from Rs.2 to Rs.2000 or more. Like Rs.2,5,10,20,50,100,500,1000 and 2000. But Except Rs.1. Because Government of India issue Rs.1. we can see the one different between Rs.1 and another from Rs.2 to Rs.2000. see the below sentence.
In Rs. 1 of Note.it is written.  GOVERNMENT OF INDIA and it is signed by Finance Secretary, Minister of Finance. as below picture.
Obverse                                                                     Reverse

This Note of Rs.1 is Unit of Currency is issued by GOVERNMENT  OF  INDIA . and not by the Reserve Bank of India. it is not a Promissory note and it considered as Asset. Rs.1 = 100 paisa. smallest unit of  currency note.
Here we must understand that 1 rupee note is not a Promissory note and it is Asset. and it is issued by Government of India.
Except 1 rupee, all denominations note is issued by Reserve Bank of India and it considered as a liability. and it is a legal tender of denominations of Notes which is
Guaranteed by Central Government.  

we can see on this denominations notes, it is written.
1 .Reserve of India.
2. Guaranteed by Central Government.
3. I promise to pay the bearer the sum of two rupee or ( Five, Ten, Twenty, Fifty, Hundred, Five          Hundred, Two Thousand)
4. Signature of RBI Governor.

So  this is a Promissory note. There is no value of this notes if Central Government withdraw their Guarantee.
Now many questions arise.
why Government of India not issue all Notes? Why Central Government give Guarantee ? on this we will discuss later. RBI was a private financial intuition / entity and it is a autonomous body but after nationalized, it is a financial branch of Government of India. anyway this all are worked under their internal rules which will discuss later.                                                         
Now we will try to understand this by a easy language, Here RBI has authority  or has tender of authority to Issue all notes except one rupee notes. Government of India says to RBI that you take the tender and make this notes in circulation for Trade, Economics activity and Exchange among our citizen. Because Govt. of India is elected by us. so here Govt. of India give tender and guarantee also.
Now RBI give agency under his to many Banks like KOTAK MAHINDRA BANK, HDFC BANK, AXIS BANK , ICICI BANK and many more. these all banks are agent of RBI. Because RBI cannot reach directly among us to sale his product.
Like same way  companies give agency to somebody for selling their product. here who take the agencies, called agent.
Now what RBI Sale? and what is RBI'S Product? RBI's Products is Note. RBI Manufacture/Prints and Customize their product. first RBI Sale his Note to under his Banks and these all Banks sale the Notes among public. very interesting,              
so, they sale Notes for Notes and get profit also Notes.
Notes sale  for note and from here the magic start.  A hidden magical  game begin from here and it is a dangerous game which is being played since many years. we will discuss later next on this.

Click below link for previous article on Concept of Money and Banking System.
https://sheikhmon.blogspot.com/2020/04/concept-of-money_88.html
https://sheikhmon.blogspot.com/2020/04/concept-of-money-and-banking-system.html


Comments

Unknown said…
Very informative. Thank you for sharing.
April 13, 2020 at 10:45 AM
Unknown said…
Very informative and Interesting to know about money and banking.
May 20, 2020 at 11:51 AM
UVL said…
Very informative.
December 2, 2022 at 7:00 PM
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