Every banknote issued by the Reserve Bank of India –Rs 2, Rs 5, Rs 10, Rs 20, Rs 50, Rs 100, Rs 200, Rs 500, and Rs 2000 –unless they are withdrawn from circulation, are legal tender at any place in India.

But have you noticed that every Indian currency is backed by a Promissory Clause that clearly states the lines ” I promise to pay the bearer a sum of rupees…”.

What is the meaning behind RBI’s Promissory Clause?

As per Section 26 of Reserve Bank of India Act, 1934, the Bank is liable to pay the value of banknote. This is payable on demand by RBI, being the issuer.

The promissory clause printed on the banknotes i.e., “I promise to pay the bearer the sum of Rupees …” denotes the obligation on the part of the Bank towards the holder of the bank note.

How does the Reserve Bank distribute currency to the people?

The Reserve Bank presently manages the currency operations through its 19 Issue Offices located at Ahmedabad, Bengaluru, Belapur, Bhopal, Bhubaneswar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, New Delhi, Patna, Thiruvananthapuram and a currency chest at its Kochi office.

Awide network of currency chests maintained and managed by scheduled banks are part of RBI’s currency management architecture. The Issue Offices receive fresh banknotes from the currency printing presses which in turn send fresh banknote remittances to the currency chests. Direct remittances of fresh banknotes by the presses to select currency chests also happen.

The Reserve Bank offices located at Hyderabad, Kolkata, Mumbai and New Delhi (Mint Linked Offices) receive coins from the mints. These offices then send the coins to the other offices of the Reserve Bank who in turn send the same to Currency Chests and Small Coin Depots. The banknotes and rupee coins are stocked at the currency chests and small coins at the small coin depots. The bank branches receive the banknotes and coins from the Currency Chests and Small Coin Depots for further distribution among the public.