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Eye for Details - Why does Re. 1 note not have the words - "I promise to pay the bearer .." on them?

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Welcome to Eye for Details, a brand new series where we try to educate you about certain facts that you might not know. We begin this series by addressing a very interesting fact that not many people in India know about the Indian currency. 

Here’s a task for you, our readers, take your wallet, and take out a note of any denomination higher than Re. 1. Now, look at the side of the note where Gandhiji resides. Depending on the denomination of the note, you’ll find the following lines either below the amount written or besides Gandhiji’s picture:
“I PROMISE TO PAY THE BEARER THE SUM OF TWO THOUSAND RUPEES” (in case of Rs. 2000 note) signed by the Governor.

Now, if you have a Re. 1 note, look for the same lines in the note. Found it? No? Do you know why? No? Don’t worry, we’re here to help!

Like most countries in the world, India follows the system of fiat money. What this means is that by law and enforcement of the government, a mere piece of paper or metal was converted into an official currency of India, holding a limited value. Now, the official currency of India as per the Government is Rupee represented by the One, Two, Five, and Ten Rupee coins along with the One Rupee Note (which is considered as a ‘Coin’ as per the Coinage Act of 2011). These coins are issued by the Finance Secretary of India, and not the RBI which merely acts as a distributor of the same. These coins are the actual assets of India. When you hold the aforementioned coins, you already hold an asset, and hence the words "I promise to pay .." are not written on them.

On the other hand, all the notes (except Re. 1 notes which are printed by the Govt. of India) printed by the RBI are a liability, which merely promises you to pay an asset! The asset is defined by this ‘One Rupee’. In other words, when you hold a Two thousand Rupee note, you merely hold the right to receive 2000 notes/coins of, say, Re. 1. But when you hold a Re. 1 note, you have it already! If you are a commerce student, it can easily be understood by the concept of promissory notes. The high denomination notes are merely promissory notes issued by the RBI, promising to pay you real currency in exchange of the promissory notes. 


I hope you learned something new today. If you did, please like and share the same with your friends so that even they can know this basic fact that every Indian should know about. Do leave your feedback, to let us know what you think of the blog, and follow us on social media so that you don't miss out on more amazing facts.