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The Conjuror’s Trick: An Interpretive History of Paper Money in India

Looks can be deceptive, especially if one is holding a copy of The Conjuror’s Trick: An Interpretive History of Paper Money in India authored by Bazil Shaikh, former Secretary and Principal Chief General Manager of the Reserve Bank of India. It is a slim, glossy coffee table book whose compact size belies the encyclopedic breadth of knowledge and information within. The book is written simply and with great clarity, a feat in itself, given the overlapping, multiple lenses through which the history of Indian currency[1] and banknotes are viewed. These range from finance and central banking to political, economic and social history, public policy and art. Shaikh integrates into his narrative, how all these factors together resulted in the paper money that Indians past and today transact with.

The author delineates notable currency and banknote issues in British India, its overseas dependencies, Indian Princely States and in independent India – past and present — right upto December 2020, when the book was released.  This is not a linear study of the 350-year-old history of paper money in India, though it does trace the transition from barter to cowrie to metallic coins and finally paper.  Instead, it is a multidisciplinary study, where the author explains how money — a store of value, a unit of account, and a means of exchange and of credit creation — has moved from the tangible to the token (early paper money) and now, possibly to the abstract, fiat money and crypto currencies.

The main narrative begins with the monetary and policy history of the erstwhile English East India Company (EEIC) and its initial economic liberalism that engendered an era of free banking in India. The first modern bank – the Bank of Hindoostan (est. 1770) – began by issuing its first bank notes. This was followed by the private issue of notes by other banks such as the Bengal Bank (1782) in Calcutta and the Carnatic Bank (1788) in Madras. Note-issuing banks were a-plenty in Calcutta, like the Union Bank (est. 1829) – founded by private English and Indian merchants like the wealthy Dwarkanath Tagore – and India’s first quasi-government chartered[2] bank, the Presidency Bank of Bengal. Calcutta by then was the capital city of British India.

Though this appears fairly straightforward, there is a caveat. The EEIC, a foreign territorial power on the Subcontinent, recognising the power arising from the right to issue money, initiated the minting of silver coins. It was done initially in the name of the Mughal emperor and after 1835 in its own name as a symbol of its sovereignty-hegemony, which  it pursued actively. Private currency notes issued by these banks were convertible into silver rupee coins minted by the Company, on demand. These banks followed the fractional reserve system and typically maintained a reserve of about 30% in specie coins (gold and silver ones).

The era of private note issues lasted for about 90 years and came to an end when the British Indian Government, then under the British Raj, assumed the monopoly of note issue based on the Paper Currency Act (XIX of 1861).

Whilst detailing milestones like these, this book deals with every macro and micro disruption, innovation and trend impacting Indian paper currency. Just one example, is the Japanese invasion of erstwhile Burma in 1942. Although British Burma had formally separated from British India in 1937, the Reserve Bank of India (established on 1 April 1935 as India’s central bank) issued banknotes in Burma that were not legal tender in India. This was done after the British gave Burma its own constitution in 1937, thereby making it an independently administered colony. The Japanese invasion forced not just the destruction of Burmese notes and coins but a denial by the RBI to exchange them lest these notes were sourced from Burmese banks looted during the Japanese invasion. Worse still, that they could be presented at its counters on behalf of the enemy!

One fallout of this ‘denial’ was on the Chinese troops[3] sent to India to fight the Japanese on the Burmese front. Many found themselves with Burmese cash as their salaries and expenses were partly paid in this currency by the British. While this wrangle between Britain, colonial India and China was soon settled through diplomatic channels by October the same year, a bigger problem arose for these troops when high denomination British Indian notes[4] were suddenly demonetized on 12 January 1946. Almost all were paid in Indian rupees. After much diplomatic back and forth between the three countries, accounts were squared with smaller denomination rupee notes being given in exchange for the demonetized ones being simultaneously destroyed in Kunming, a terminal city on the iconic Burma Road and then an important military centre.

What is fascinating too, is the on-the-go adaptations like ‘half notes’ that were introduced to make the circulation of paper money more secure, particularly for official as well as personal remittances sent through the postal network. In 1809, the Postal Department, in light of the danger to the lives of its postmen posed by enroute robberies, stopped accepting valuables – money (coins), jewels, watches, or trinkets ‘of any description’ – with the exception of banknotes, on the condition that they be cut in half and the two halves be posted by separate mail as a precaution.

Given the vast range of subjects and nuanced details that Shaikh has woven into bringing alive the global and regional history of Indian paper currency, this book is a riveting read. Readers will surely wish the publisher had stayed with the tradition of the hard cover MARG coffee-table format with   a larger font and more spacing between lines!

The Conjuror’s Trick: An Interpretive History of Paper Money in India by Bazil Shaikh. Marg Publications (Mumbai), December 2020.

Sifra Lentin is Bombay History Fellow, Gateway House.

This review was exclusively written for Gateway House: Indian Council on Global Relations. You can read more exclusive content here.

For interview requests with the author, or for permission to republish, please contact outreach@gatewayhouse.in.

© Copyright 2021 Gateway House: Indian Council on Global Relations. All rights reserved. Any unauthorized copying or reproduction is strictly prohibited.


[1] A currency note is one issued by government. Banknotes are issued by banks and the Central Bank of a country.

[2] When a bank acquired a charter issued either by the EEIC’s board of directors in London or a royal charter, it effectively limited the liability of its shareholders to the number of shares they held. Banks were then in effect legally partnerships with unlimited liability.

[3] This was the Chinese First Army sent by the Nationalist Government of Chiang Kai Shek to India. They were assisted by US forces under Lt. Gen. Stilwell. In return for reinforcing British Indian troops on the eastern front and holding Burma, British India provided logistics and financial resources for the maintenance and salaries of these troops.

[4] The Rs 500, Rs 1000 and Rs 10,000 notes were demonetized.