Report of the Royal Commission on Indian Currency and Finance Vol. I

Abstract

The Royal Commission on Indian Currency and Finance, appointed in 1925, was tasked with examining India’s exchange and currency system and recommending reforms in the interest of the country. The report provides a historical retrospect of India’s currency, highlighting the transition from a silver-based mono-metallic system to a gold exchange standard following the recommendations of the Herschell Committee in 1893. The stoppage of free silver coinage aimed to stabilize the rupee’s value relative to gold, ultimately targeting the establishment of a gold standard, though gold never became a substantial part of internal circulation. The Commission reviews the performance of prior committees, such as the Fowler and Chamberlain Commissions, emphasizing that while India maintained stability under a gold exchange standard, active circulation of gold was not necessary for its effectiveness. The report outlines the functioning of reserves, elasticity of currency, control of credit, and alternative proposals for reform, including the introduction of a gold currency, note convertibility, and savings certificates. It further considers the creation of a central bank for India, detailing its capital, governance, note issue, reserve requirements, and relationship with the government to ensure financial stability and systematic management of currency. The Commission stresses the importance of aligning India’s monetary system with both internal economic needs and external exchange requirements, providing a comprehensive framework for stabilizing the rupee, managing reserves, and promoting banking development.