What Are The Different Principles And Methods Of Note-Issue In Pakistan?


5 Answers

Sajid Majeed Profile
Sajid Majeed answered
There are two principles of note issue. First is the Currency Principle and the second is Banking principle. There are different views about these principles. One school of thought says there should be full convertibility of notes into gold bullion.
Currency Principle:
The lover of this principle say that paper money is better than the metallic money but there should be 100% backing of gold reserves. They say that in order to maintain the prestige of paper money gold should be available for the conversion of notes when presented.
Bank Principle:
According to this principle there is no need of reserve requirements of gold and silver for the notes issued. The banks are authorized to regulate the note issue keeping in view the needs of the business in the country. The banks themselves will maintain adequate reserves of gold for meeting their obligations of note. If there is an over issue of notes, the excess money will be automatically presented for each payment and proper ratio will be maintained between the supply of money and the gold reserves.
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Anonymous commented
Good information but incomplete. I write further information,you will get more benefite his information. Note: The currency principle was first proposed by (overstone), who was a british parliamenterian. Thanks
Anonymous Profile
Anonymous answered
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 ,silver bullion and approved foreign exchange.the
Nouman Umar Profile
Nouman Umar answered
The state bank of Pakistan is the sole authority of the note issuing in the Pakistan. Every year the States bank issues new notes according to the demands of the market so there are many people in the Pakistan which uses the different paper notes for the daily life transactions.

There are two ways the government of Pakistan issues the notes in the country one is to introduce the monetary policy in the country and in order to make the tight monetary policy the government of Pakistan cease the production of new notes in the country and on the other hand if the need of the money supply is necessary then the government try the expand the notes by issuing new notes in the country so that it relaxes the flow on money in the economy.

The government uses the new issues of note when the government wants to change the design of the notes. So in order to prevent the fake notes in the country the government has adopted a policy to change the designs of the notes every year.
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Anonymous commented
The state bank of Pakistan followed up the proportion reserve system, the bank must keep least 1200 RS billion of foreign exchange and other securities, state bank is not obliged to issue note with the constant rate, it determines from the prevailing interest rate and on going business in the country to meet the demand of the various sector


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