Seigniorage ,All about currency notes and coins , Time/Demand Deposit,Currency in circulation vs Currency with Public

 

Seigniorage: 

• Seigniorage is the difference between the face value of currency/money and the cost of producing it. 
• Seigniorage is essentially the profit earned by the Government   by printing currency. 
• If the cost of printing a Rs 500 note in India is Rs 2, then Rs 498 is the profit made on the production of the note and it is Seigniorage.

Seigniorage Formula: 

Face value of currency/money -Cost of producing Currency 

Issue of currency Notes:

• In India, monetary authority is RBI .
• All the currency notes except One Rupee Note  are issued by the Reserve Bank of India (RBI),under Section 22  of RBI Act 1934.

Issue of Coins and One Rupee currency Note:

• The Government of India is responsible for the designing and minting of coins in various denominations as per the Coinage Act, 2011.
• One Rupee Note are signed by Finance Secretary, GOI.
• The role of RBI is limited to distribution of coins that are supplied by Government of India. 
• Coins and one rupee note are the liability of GOI. 

Currency Chests: 

• Currency chests are storehouses where bank notes and rupee coins are stocked on behalf of the Reserve Bank. 
• Deposits into the currency chest are treated as reserves with the Reserve Bank and are included in the Cash Reserve Ratio.

Different type of deposits:

●        Demand deposit

●        Time deposits

Demand deposits: 

Deposits in the form of saving accounts are called demand deposits as they are available on demand of the account holder and the bank is mandated to pay it as and when demanded by the depositor.

Time Deposits:

• Deposits which are having a fixed period to maturity are referred to as time deposits. 
• Deposits like fixed deposits are examples of Time Deposits.

Money in circulation:

In a modern economy money in circulation comprises mainly of currency notes and coins issued by the monetary authority of the country. In India, term money includes

●        Notes and Coins,

●        Balance in savings, current  and demand  deposits

Currency in circulation vs Currency with Public: 

• Currency with Public is the money in the hands of public exclusively and is the most liquid in the economy as it is at the disposal of the individual.
• Currency in circulation comprises of currency notes and coins with the public and cash in hand with banks or DD. 
• Currency in circulation is more than currency with public. 
• Currency in circulation is a major liability component of a central bank’s balance sheet.