Financial History 145 Spring 2023 | Page 37

rupees . However , throughout the war German propagandists actively attempted to convince the Indian people that British banks did not have enough silver coins in reserve to redeem the council bills . This propaganda played into the general mistrust of paper money held by many Indians .
According to Fred L . Israel , in a 1961 article in Pacific Historical Review , “ An unexpected run on the British redemption agencies in 1917 verified this . The British were able to meet demands for payments in silver up to the beginning of 1918 .”
Problems in Britain and India
In early 1918 , a fresh order of silver bullion was placed , for the large distribution of coin at Christmastime in the United Kingdom had failed to return . On March 16 , the Bank advised the Royal Mint that its supply of coinage was insufficient . Only two days later , the deputy master acknowledged that the Mint was unprepared for currency needs , and was thus behind schedule in every respect . He could see no way out of the predicament without the issuance of small notes .
Additionally , there was a shortage of silver bullion . Production of the white metal had diminished and , in 1918 , a great demand arose in India . The Bank ’ s unpublished report states , “ Not only was it necessary to provide against a possible run on the [ Indian Redemption ] Agencies to cash silver certificates , but the position was accentuated by the fact that the large wartime exports from India could not be balanced by imports , resulting in an excessive demand for rupees and the absorption of these into circulation .”
The situation in India exacerbated . It was not helped by cultural attitudes about money . In an interview with The New York Times in 1918 , James Meston , finance member designate of the Viceroy ’ s Council , said , “ Indian financiers have always
Three council bills issued by the British administration in India : Top , a five rupee note issued on December 2 , 1918 ; middle , a 10 rupee note issued on August 22 , 1918 ; bottom , a 100 rupee note issued on July 10 , 1918 . Such notes were silver certificates redeemable on demand at the Indian Redemption Agencies at face value for silver rupees .
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