The value of the Sri Lankan Rupee
Coins first contained almost their value in Gold, Silver or Copper. The small difference known Seigniorage, was to cover cost of Minting but subsequently also included some revenue for the Rulers.
Bank notes were issued to enable simple transport of large amounts of cash, while significantly reducing the risk of loss. So while the Gold and Silver remained safe in the bank vault, the piece of paper to that value was issued with a promise to pay on demand with coins known as specie. A coin which did not contain its value in the metal it was made, was called a Token.
The original Indian Rupee was defined by Sher Shar Suri in 1545, as 11.5 grams of silver. During the 1780′s in Dutch Ceylon some silver suratirupiyal were minted in Colombo. This was the first Ceylon Rupee and is now extremely rare. In Malay Arabic script it says Coin Holland Company Colombo, on obverse and Money, Island (of) Ceylon and date 1764 on reverse.
The East India company rupee was adopted in Ceylon in 1835, as the unofficial standard, when England refused to send more silver coins, as the island’s Jewelry makers found it profitable to melt them.The Indian silver rupee became official currency in 1870. In 1917 Ceylon issued a One Rupee currency note, and soon had its own identity independent from the Indian rupee.
In 1941 December the Commissioners of Currency replaced the words on bank Notes “Promise to pay bearer on demand the sum of …” with “This note is Legal Tender for payment of …” and in 1942 December demonetized all silver coins. From then on, worth only the legal statement, the Ceylon rupee depreciated and a Gold Sovereign which was Rs. 10 in 1941 was worth more than Rs. 11,000 in 2005. The Rupee had depreciated on average by 11 per cent per year or a factor of 10 each 22 years.
he one Rupee banknote was replaced with a cupro-nickel coin in 1963, a Nickel plated steel coin in 1996 and a smaller brass plated steel coin in 2005.
In India however the notes issued for the Government by the Reserve Bank of India still say “I promise to pay …” signed by the RBI governor. What is not said is that payment is not in Silver or Gold, but with Indian coins which are minted in Steel by the Indian Government.
Issue of the Indian Rupee Bank Note which was discontinued in 1994 was reissued in 2015 to enable a new Government Minister and his secretary to have their signatures on a Indian bank note. It cost the Indian government IN Rs. 1.14 to print each note. These Bank Notes, legally considered “coins” have become instant collector’s item, and long queues were seen when they were first issued to the public in India in late August 2015. They are now selling for more than 100 times their face value on eBay.
In the 2014 Annual Report of the Central Bank of Sri Lanka we read that “several improvements were made to the quality of currency notes by increasing the thickness of currency paper and introducing a coating of varnish for low denominations of currency notes to enhance the durability of the notes”. This significant change to our Rs. 20, Rs. 50 and Rs.100 Bank Notes happened with no press release, and just a brief note buried in the annual report, issued more than a year after the modification.
While the Sri Lanka rupee notes may be becoming thicker, it depreciated more than 6 per cent against the US$ during September 2015, while the Central Bank reported negative inflation figure of – 0.3 per cent for the same month.
We can only hope the new Bank administration will be more transparent on these issues, particularly with the Freedom of Information Act which we all hope to see passed in the near future.
(The writer maintains an educational website on Lankan coins at http://coins.lakdiva.org <http://coins.lakdiva.org/> )