Methods of issuing of notes in Pakistan

Methods of Issuing of Notes in Pakistan. Precise detail..!

1. Methods of Issuing of Notes in Pakistan Presented By Hamna Butt

2. There are different methods of money notes issuing adopted by different countries of the world at different times. The most important of them are:- Fixed Fiduciary System. Proportional Reserve System. Minimum Reserve System. Methods of Note Issue

3. Fixed Fiduciary System :- Under fixed fiduciary system, the government fixes a fixed amount of notes without keeping any metallic reserve. But this portion of currency must be backed by government securities, which is called fiduciary Limit. The notes issued other than fiduciary limit must be fully backed by gold or silver reserves. This system was introduced in England in1844 in the Bank charter Act of 1844. Norway and Japan also adopted this method . This system acted as a brake on the undue expansion of currency and credit in the time of prosperity. This system also provides security for the convertibility of notes

4. Proportional Reserve System:- Under this system the central bank is required to keep only ascertain percentage of notes issued in the form of gold or silver. The reserve proportion is usually from 30% to 40%. It means a central bank can issue PKR- 100 note after keeping gold silver valuing PKR. 30 or 40. This method of currency regulation is the most affordable system of the present time and is widely used in many countries. It was first of all adopted by Germany in1876 and followed with modifications by U.S.A in 1914.

5. Minimum Reserve System:- Fixed minimum reserve system allows the central bank to keep only a fixed amount of reserve against whatever the amount of note issue. The reserve is in the form of gold, silver and-foreign exchange or in the form of any of these types of things. This method -is being used in Pakistan after December 1965. India is also applying it since 1957.South Africa has adopted it in 1930. Holland has been issuing notes under this method for many years.

6. Method Of Note Issue Adopted In Pakistan:- Pakistan has used proportional reserve system up to December 1965. Under this method 30% was to be kept as reserve in the form of gold coin, gold, silver bullion and approved foreign exchange. The balance was covered by rupee coin and government security After 1965. State Bank of Pakistan adopted fixed minimum reserve system Under this system the bank has to keep only legally fixed amount of minimum reserve in gold, or silver. Moreover the government in consultation with the State Bank can alter it.