───────────────────────────────────────────────────────────────────────────────────────────────── Composition of the Percentage of each Reserve. Component of the Period. Note Reserve to the Circulation. Total Circulation. ──────────────────────────────────────────────────────────────────────── Silver. Gold. Securities. Total Silver. Gold. Securities. ───────────────────────────────────────────────────────────────────────────────────────────────── 1862–1871 7·63 4·80 0·03 2·80 7·63 63 — 37 ───────────────────────────────────────────────────────────────────────────────────────────────── 1872–1881 11·82 5·98 — 5·84 11·82 51 — 49 ───────────────────────────────────────────────────────────────────────────────────────────────── 1882–1891 15·74 9·64 — 6·10 15·74 61 — 39 ───────────────────────────────────────────────────────────────────────────────────────────────── Such was the organization of the mixed currency that existed in India before it underwent a profound change during the closing years of the nineteenth century. Though of a mixed character, the paper portion formed a comparatively small part of the total. The principal reasons why the paper currency did not assume a large proportion are to be found in the organization of the paper currency itself.¹⁰⁹ One such reason was that the lowest denomination of the notes was too large to displace the metallic currency. By the law of 1861 the denomination of notes ranged upwards from Rs. 10 as the lowest to Rs. 20, 50, 100, 500, and 1,000. In a country where the average range of transactions did not exceed R. 1 and were as low as 1 anna or even lower, it is impossible to expect that paper currency could to any great extent figure in the dealings of the people. Even Rs. 5 notes, the issue of which was first sanctioned in the year 1871,¹¹⁰ were not low enough to penetrate into the economic life of the people. The other impediment to the increase of [pg 57] paper currency was the difficulty of encashing notes. One of the infelicitous incidents of the paper currency in India consisted in the fact that they were made legal tender everywhere within a circle, but encashable only at the office of issue. For such a peculiar organization of the paper currency in India, what was largely responsible was the prevalence of internal exchange¹¹¹ in the country. It raised a serious problem for the Government to cope with. If notes were to be made universally encashable it was feared that merchants, instead of using notes as currency, might use them as remittance on