Contents
1. Internal Features of India’s Present Monetary System
1.1. Unit of Money
1.2. Monetary Standard
1.3. Forms of Coins and Notes (or Currency)
1.4. Money Supply
2. External Features of India’s financial System:
2.1. Interchange Rate
2.2. Exchange Control
2.3. Interchange Reserves
Internal Features of India’s Present Monetary System
The following are the options for gift medium of exchange in India:
1. Unit of Money
The unit of cash in Bharat is the rupee, it’s not solely a medium of exchange but conjointly a unit important that facilitates accounting. As a unit of account, the rupee helps within the estimation of prices and costs, and revenues of companies and comes, and therefore the gross national product.
2. Monetary Standard
The present Monetary standard of India is the managed paper money standard. in step with this, the paper money is in circulation that is non-convertible into gold. it’s managed paper customary as a result of the difficulty of notes and coins is managed by the banking company of Bharat
3. Forms of Coins and Notes (or Currency)
The following forms of coins and notes are enclosed in India’s gift financial system:
(i) Coins
The Rupee-coin in Bharat may be a customary token coin whose intrinsic worth of the metal is a smaller amount than its face worth. If the Rupee-coin is dissolved, its metal won’t be the oversubscribed price of one rupee. The Rupee-coin is an infinite monetary system within which payment of any quantity will be created. There also are 2-Rupee coins and 5-Rupee coins in circulation since 1990.
(ii) Subsidiary Coins
There also are subsidiary coins in Bharat to help the money. At present, coins of the denominations of one subunit and three, 5, 10, 20, twenty-five, and fifty subunits are in circulation. The 50-paise coin just like the Indian rupee-coin is an unlimited monetary system.
But all coins from one subunit to twenty-five paise are restricted monetary system that payment will be created solely up to Rs. 25. The minting of one, 3, 5, 9, and ten subunit coins has been stopped since 1996 however they’re going to stay in circulation until their transactions are stopped by the general public themselves.
(iii) Notes or Paper Currency
Paper currency in India consists of notes of assorted denominations that are issued by the banking company of India and therefore the Government of India. The one-rupee note is issued by the Ministry of Finance of the govt of Bharat and bears the signature of the Secretary.
It is inconvertible folding money that is additionally referred to as paper money or representative or money. however, it’s an unlimited monetary system. the opposite notes of the denominations of Rs. 2, 5, 10, 20, 50, a hundred, and five hundred are issued by the banking company of Bharat. They are inconvertible into gold, however, are an unlimited monetary system. they’re convertible into coins and notes. they’re fiduciary cash.
(iv) System of Note Issue
The present system of note issue in Bharat is the Minimum Reserve System. underneath this technique, the run is authorized to issue notes up to any extent however it should keep a statutory minimum reserve of gold and foreign securities. consequently, the run is needed to stay at a minimum reserve of Rs.200 crores. Of this, Rs.115 crores should be in gold and Rs.85 crores in foreign securities.
4. Money Supply:
In India, the money provides consists of each slender cash (M1) and broad cash (M3). money supply consists of currency notes and coins with the general public, demand deposits with industrial and co¬operative banks, and different deposits with RBI. M3 consists of money supply and time deposits with banks and is additionally referred to as combination financial resources. As of thirty-one March 2003, the full money supply in Bharat was Rs.4,72,827 crores and M3 was Rs seventeen,25,222 crores.
External Features of India’s financial System:
1. Interchange Rate:
Since the Gregorian calendar month of 1976 with the sign language of the Jamaica Agreement, Bharat is following the policy of floating exchange rates. in step with this, the external worth of the Indian rupee is connected to a ‘basket’ of currencies of these countries with that Bharat has massive trade. this is often the Nominal Effective rate of exchange (NEER) of the rupee that may be a weighted average of exchange rates vis-a-vis the currencies of India’s major mercantilism partners.
Up to Feb 1993, Bharat followed a twin rate of exchange regime. in step with it, the run fastened the exchange rates in terms of the varied currencies like the greenback, pound, mark, yen, franc, rouble, etc. from time to time and every one legal exchange transactions materialized at the declared official rates.
In March 1993, Bharat was captive to one market-determined rate of exchange system. Under it, there’s no formally fastened rate of exchange of the rupee. Instead, the rate of exchange is set by the demand and provides conditions within the interchange market. however, the run intervenes solely to take care of orderly market conditions and to curb excessive speculation.
2. Exchange Control:
To conserve interchange, the run controls all foreign receipts and payments within the sort of foreign currencies. it’s associate Exchange management Department for this purpose. Foreign currencies coming back into the Bharat are needed to be oversubscribed and changed for the rupee either direct to the run or its authorized dealers (ADs). Its authorized dealers embrace bound industrial banks, hotels, firms, shops, etc. that deal in foreign currencies and foreign travelers’ cheques.
3. Interchange Reserves:
Foreign exchange reserves with the run show the number of foreign currencies which may be utilized by the country for trade and different foreign transactions. The variations in interchange reserves conjointly show the balance of payments position of the country.
