6. Up to 1900 the volume of sales of Council Bills in any year was mainly governed by the amount required to defray the Home Charges, this amount partly depending on the volume of capital borrowings in the year. But the sales also fluctuated, though within comparatively narrow limits in most years, according to the Secretary of State’s opportunities (depending on the activity of business and the balance of trade) of selling his bills at a satisfactory rate. Since 1900, however, the functions of the Council Bill system have been enlarged, and it has now become a very important part of the general mechanism for the maintenance of the Gold Exchange Standard. 7. The way in which this has arisen is easily explained. On account of the provision by which rupees can always be obtained in India in exchange for sovereigns at the rate of 1s. 4d. per rupee, it can never be worth while for the banks to buy Council Bills at a price which exceeds 1s. 4d. by more than the cost of sending gold to India. This cost varies considerably from time to time, but it seldom exceeds ⅛d. If, therefore, the Secretary of State refuses to sell bills at less than 1s. 4⅛d., when the banks are requiring to remit to India, gold will flow. This gold will be presented at the Treasuries in India to be exchanged for rupees or notes. Thus the only effect of the Secretary of State’s refusing to sell remittances at a price which suits the banks is that sterling resources accumulate in his Treasuries in India instead of in England. This may not be convenient to him. For example, if the banks are sending gold to India on a large scale and are exchanging it for rupees, a time may come when this demand can only be met by minting more rupees; the silver for this must be purchased in London and the profit on the coinage must be credited to the Gold Standard Reserve which, for reasons to be discussed in the next chapter, is kept for the most part in London; thus the gold has eventually to be shipped back again to England to pay for the silver and to be credited to the Gold Standard Reserve. In this case a double loss is involved—the cost of sending the gold to India (for the Secretary of State could probably have got 1s. 4⅛d. per rupee if he had sold transfers, whereas if gold flows he gets only 1s. 4d.) and the cost of bringing it back again, say, 3/32d.; thus a refusal to sell bills would mean an eventual loss of nearly ¼d. per rupee or about 1½ per cent. Or, again, the policy of holding some part of the gold in the Currency Reserve in London for possible use in emergency, may lead to the Secretary of State’s preferring gold to accumulate in London rather than in India; otherwise it will have to be sent back again, in pursuance of this policy, and a double loss incurred, as in the former case. Lastly, if the Secretary of State has considerable cash balances in India, it may be worth his while for a time to cash additional Council Bills out of these, thus in effect transferring his