Most Common Interview finance Question 2020

When you observe the balance sheet of the Reserve Bank Of India, you will discover that the notes that the RBI issues come under the section of Liability whereas “Coins” are classed as Assets. If it seems confusing to you, you need to explore the rationale that works behind it.

RBI has got the ultimate right from the RBI Act 1934 to issue banknotes and additionally, the Section 34 specifies that the Issue Dept. of Reserve Bank of India would have a liability of an amount which is same as the amount which is total of the currency notes, i.e. each note which is printed turns into the Reserve Bank of India’s liability.

It is also illustrated through the promissory clause which is printed on the banknotes that the Governor of RBI signs. This liability is again confirmed by the Govt. of India according to Section 26 of the Act of 1934.

However, for coins, the issuance method is totally different. The liability of minting as well as issuing coins lies with the Govt. of India. Under the Reserve Bank of India Act, govt. has submitted an undertaking for circulating the coins in the economy through RBI.

According to the process of circulation, RBI purchases the mint coins right from the government and so, the coins continue to come and stay under the section of the asset of Reserve Bank of India’s balance sheet.

Source: Indian Structured Finance 

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