Gold is treated as the commodity but used as currency, Even the RBI has to keep gold reserves in order to print currency.
The printing of notes is done by central banks, for India it's RBI , The SecurityPrinting and Minting corporation of India limited does the printing of banknotes, coins, stamps etc for GOI. The company was established in 2006 Under MoF .
SPMCIL has four presses:
1: Currency Note Press (CNP), 1928, Nasik.
2:Bank Note Press (BNP), Mysore.
3:India Security Press, Nasik.
4: Security Printing, Hyderabad.
SPMCIL has four mints:
1: India Government Mint, Mumbai.
2:India Government Mint, Kolkata.
3:India Government Mint, Hyderabad.
4: India Government Mint, Noida.
For producing coins, and medals and awards,
Security Paper Mill ,1968 Hoshangabad, Madhya Pradesh. For producing the papers for banknotes and non–judicial stamps.
Earlier Proportional reserve system was followed under which 2/5 minimum gold or sterling was to be provided and gold to be at least 40 crores. remaining 3/5 of the asset can be rupee coins.
Minimum Reserve System
Whereas current scenario is that India is following Minimum Reserve System since 1956 Under which RBI Maintains at any point of time minimum of 200 cr of reserves out of which 115 crore has to be in the form of Gold . gold coins, gold bullion, and rest can be Foreign reserves,
RBI under its monetary policy for expanding the money supply taking into consideration the economic growth and other factors issues currency to meet the transaction needs along with this RBO has to secure Reserves since printing new currency is always a liability , Decreasing CAD and increasing Foreign reserves are also related to it.
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