In the matter of paper currency the Government, it is to be noted, did not proceed upon the principle of freedom of issue which then obtained in the country. There prevails the erroneous view that before the introduction of the Government paper currency the right of note issue was confined to the three Presidency banks in India. As a matter of fact there existed in India what is called the free banking system, in which every bank was at liberty to issue its notes. It is true that notes of the Presidency banks enjoyed a status slightly superior to that enjoyed by the notes of other banks in that they were received by the Government to some extent in payment of revenue⁹⁹—a privilege for which the Presidency banks had to submit to a stringent legislative control [pg 54] on their business¹⁰⁰ from which other banks whose issues were not so privileged were immune. But this disadvantage was not sufficient to discourage other banks from indulging in the right of issue which was left open to them by law. However, this freedom of issue does not seem to have been exercised by any of the banks on any very large scale, not even by the Presidency Banks,¹⁰¹ and was taken away from all in 1861,¹⁰² when there was established a national issue for [pg 55] the whole of India entrusted to the management of a Government Department called the Department of Paper Currency. But if private interest was not allowed to play the same part in determining the quantity of paper currency as was the case with regard to metallic currency, neither was any discretion left to the Government Department in the regulation of the paper currency. The Department of Paper Currency had no more discretion in the matter of paper currency than the Mint Master had in the matter of metallic currency. ⁹⁹ Cf. F. C, Harrison, _Economic Journal_, 1891, Vol. I, p. 726.