The remaining element which determines the cost of remittance—variation in the market rate of interest—has been dealt with already, 1/32d. represents the interest on 1s. 4d. for a fortnight at 5 per cent per annum. It is easy to calculate how the gold export point is affected by fluctuations in the market rate of discount in India on either side of 5 per cent. 11. So far we have been dealing with the upper limit of exchange and with the results of a heavy demand for Council Bills. The effects at the lower limit differ in this important respect, that the Government are under no legal obligation to prevent the depreciation of the rupee, and have not undertaken to give sovereigns for rupees in the way that they have undertaken to give rupees for sovereigns. There is nothing in law, therefore, to prevent exchange from falling indefinitely. There has been no change in law in this respect since 1895, when exchange actually did fall below 1s. 1d. The Government has, however, practically pledged its word to do all in its power to prevent the depreciation of the gold value of the rupee and to prevent exchange from falling below the lower limit of 1s. 3–29/32d. The business community would rightly regard it as a breach of faith if the Government were to permit exchange to fall below this rate, unless all reasonable resources had been exhausted. 12. We now see how intimately the management of Council Bills and of Government remittance is bound up with the Gold–Exchange Standard. The disadvantages from the point of view of regulating a Gold–Exchange Standard, which arise out of there being no Government bank, are partly compensated by the Secretary of State’s being the largest dealer in foreign exchange. By regulating the amount of bills he offers for tender, he is able to regulate to a great extent the level of exchange. When exchange is falling below par he can support it by greatly restricting his offers; and if he cannot get at least 1s. 3–29/32d. for his bills, he withdraws from the market. In the meantime, of course, he has payments to make in England, while on the other hand rupees accumulate in India, as the revenue flows in and no Council Bills are presented for payment. If the cash balances in London are not sufficient to stand the drain on them, gold at the Bank of England may be “un–earmarked” and placed to the Secretary of State’s current account, rupees in India being transferred at the same time from the Government balances to the silver portion of the Paper Currency Reserve—the reverse process from that which has been described already as the result of exceptionally large sales of Council Bills.