Silver Note

It is necessary to understand the circumstance and events that necessitated the printing and issuing notes of smaller denomination in India as until 1917 the smallest denomination of Indian Currency note was 5 Rupees. A huge distrust in the currency notes of all denominations arose from 1916. This resulted in the public encashing these currency notes into coins. The currency notes were also subjected to discount of its par value. The Government of India was put to great test in retaining the trust of the public in currency notes by converting them to silver from paper. The Government faced a situation where the silver got exhausted and they could not convert the currency notes in many cases. The World War I also added to the misery of the Government. Even gold sovereigns were offered to the public in exchange of the currency notes. This failed because they came back to the Treasuries as soon as they were issued. The rise in price of silver also did not help as people indulged in speculation and hoarded coins. This severe shortage and price rise in silver and other metals caused by the World War made people hoard silver for personal gains. The situation would have been quite drastic if USA had not supported India by melting 200 million troy ounces of silver and delivering that to India in 1918, which in turn produced 260 million silver rupees.