II. 1825-1868. FROM THE ORDER IN COUNCIL INTRODUCING BRITISH CURRENCY TO THE ORDER IN COUNCIL CONSTITUTING THE COMPANY'S RUPEE AND ITS SILVER SUBDIVISIONS THE ONLY LEGAL TENDER IN CEYLON.
8. 1825-Introduction of British Silver. Public Accounts in £. s. d.
In 1825 the Home Government decided to introduce British silver coins into all the Colonial possessions with the object of providing "an unobjectionable and unvarying medium for the payment of troops and of establishing a uniform currency in the whole of His Majesty's Foreign possessions founded upon and having reference to the currency of the United Kingdom". By Order in Council of March 23, 1825 (Appendix A), and Regulation 8 of July 4, 1825 1, British silver was declared legal tender for the payment of any amount, as also were the silver rixdollars of 1821 and the paper rixdollars at the rate of 1s. 6d. each. British copper viz., pence, half-pence, and farthings, and the copper coins of the Island viz., fanam at 1½d., half-fanam at ¾d., pice at ⅜d., half-pice at 3/16d., and the Dutch challie at ⅛d., were made legal tender to the extent of 1 shilling. Regulation 8 further ordained that thenceforth all Government Accounts in Ceylon should be kept in pounds, shillings and pence.
It was also notified that bills on London at 3 days' sight would be exchanged by the Government for sums of not less than £100, at the fixed rate of £100 sterling = £103 of either British silver money, paper or silver rixdollars paid into the Colonial Treasury.
9. Spanish Dollars and Indian Rupees.
If the Governor required any sum beyond the amount so paid into the Treasury at the prescribed rates he was further authorized to negotiate his bills for Spanish dollars, Indian rupees, or other coin at the best terms he could obtain and issue them at their intrinsic value as compared to British standard silver at 5s. 2d. an oz. At this rate Spanish and American dollars were valued at 4s. 4d., the Sicca rupee at 2s. 1d., and Bombay and Surat rupees at 1s. 11d. These coins had been overvalued, compared with the then market price of silver and the British silver in its representative capacity, to the extent of nearly 4 per cent.; and the error was later rectified by Minute of December 14, 1833, which fixed the value of a Spanish dollar at 4s. 2d., Sicca rupee at 2s., and Madras and Bombay rupee at 1s. 1Od.
10. 1825-1833. Cancellation of Paper Rixdollars and Issue of Sterling Notes.
In the years 1825 to 1833 the Government imported British silver to the value of £111,895 while during the same period Government bills on London were disposed of to the extent of £1,521,784. The paper rixdollars paid in were all cancelled and a new paper currency to the extent of about £90,000 expressed in terms of sterling was issued under Regulation 8 of 1827. This enacted that Government notes expressed in pounds payable in the currency of the Island shall pass current at 20 shillings sterling. The notes were payable at the Treasury in specie on demand but the holders were not allowed the right given to the holders of the old inconvertible rixdollar paper of exchanging them for bills on London at the fixed rate of premium.
Regulation 6 of 1830 demonetized as from January 1, 1831, all copper coins struck in Ceylon and then current.
11. 1833-1836. Failure of attempt to introduce and circulate British Coins in Ceylon.
After 1833 no importation of British silver appears to have taken place. Although British silver coins and rixdollars continued to be the only legal tender and the accounts were kept in terms of British money, the object of "establishing a currency for the Colony founded upon and having reference to the currency of the United Kingdom" and the scheme for retaining it in the Island by means of a fixed rate of exchange were both defeated by the fluctuations of Indian exchange for which no allowance had been made. Government was obliged to sell its bills on India, frequently at very unfavourable rates, and to import and put into circulation the proceeds which consisted of Indian rupees which were not legal tender. In the period 1834 to 1836 rupees to the value of £141,136 were imported by Government from India and issued at the rates fixed in 1833. The rupees so imported did not remain long in circulation but were re-exported to India owing to fluctuations in exchange and in consequence of the Island's unfavourable balance of trade. It was considered at the time that the difficulty of retaining the coin in the Island arose from the undervaluation of the rupee as compared with its exchange value, the rupee being then worth for exchange on London from 2d., to 2½d., above its intrinsic value.
12. 1836-1850. Disappearance of British Silver and Rixdollars. Introduction of "Company's" Rupee.
The Madras and Bombay rupee of 180 grains, 11/12ths fine, was by the Indian Act of August, 1835, No. XVII, adopted as the standard rupee for the whole of India and was styled the" Company's" rupee 2. The intrinsic value of this coin was 1s. 10⅜d., silver at 5s. per oz., but it cost the Government from 2s. to 2s. 0½d. in India in exchange for its bills on London plus a further charge for freight and insurance; and although not legal tender, it was issued to the Civil and Military Establishments at 1s. 10d. under the terms of the Minute of December 14, 1833. In order to counteract the flow of coin from the Island the Governor issued a Minute dated September 26, 1836, giving notice that the Company's rupee will be put in circulation in future at 2s. ½ rupee at 1s., and ¼ rupee at 6d. This effected a complete revolution in the currency system of the Island although it entirely failed in accomplishing the object for which it was designed.
By the Minute of September 26, 1836, the Company's rupee was over. rated relatively to British sterling to the extent of over 7½ per cent. It became practically the standard of value, and British silver. and rix. dollars which were undervalued relatively to the rupee naturally disappeared after a time from circulation, their place being taken by the overvalued rupee. The effect of the Minute was merely to depreciate the value of the metallic currency of the Island while it proved entirely powerless to arrest the exportation of the coin.
Thus after an ineffectual attempt to establish in the Colony the currency of the United Kingdom, and after a series of mistakes, the result produced was the assimilation of the currency of Ceylon with that of India. This was the natural order of things, considering the intimate economic and social relations existing between the two countries which may be considered geographically as one.
13. 1851-1868. English and Australian Gold coins introduced. Rupee and its subdivisions in actual use.
In 1851 the local Government requested the sanction of the Home authorities to a suggestion by the Chamber of Commerce, Colombo, to increase the currency of the Colony by the addition of British gold coins. The Lords Commissioners of the Treasury ruled that a local ordinance was not necessary to give currency within the Island to the gold coins of the Realm which, as being issued from Her Majesty's Mint under Her Royal authority, were a legal discharge for the sums they represented throughout Her Majesty's dominions. This ruling was, however, subsequently considered incorrect, and an Order in Council and a Proclamation, both dated October 16, 1852, were issued declaring that the coins of the United Kingdom (viz., sovereigns, half-sovereigns, &c.) shall pass current in Ceylon, but reducing the legal tender limit of British silver to 40 shillings (Appendix B). In 1856 by Order in Council and Proclamation dated October 22 Australian gold coins too were made legal tender in Ceylon (Appendix B).
The rupee and its subdivisions, however, continued to be the coins
in actual use throughout the Island, though not legal tender. The
Minute of September 26, 1836, was considered ultra vires as it was not
within the power of the Governor to declare a coin legal tender by a
mere Government notification, such a step to be valid requiring an
Order in Council and a Royal Proclamation or a Legislative enactment
confirmed by the Crown. Clause 5 of "The Coining Prevention Ordinance"
(No.5 of 1857) enacted, "that for the purpose of the Ordinance the
Company's rupee, half-rupee, and quarter-rupee shall be deemed to be
silver coins lawfully current in this Colony" ; but in as much as this
Ordinance did not declare the rupee a silver coin lawfully current in
the Colony "for all purposes", but only provided that "it shall be
deemed to be such for the purposes of the said Ordinance", it was
considered that the legal effect of it was simply to constitute the
counterfeiting of the rupee an offence, but that it did not make it a
legal tender. It was for this reason that the principal bank in the
Island viz : the Oriental Bank Corporation endeavoured to guard itself
against any inconvenience or loss by issuing its notes expressed in
rupees. The notes of the Chartered Mercantile Bank and those of the
Asiatic Banking Corporation were expressed in "Pounds" of "the
currency of the Island".
Ceylon Currency British Period 1796-1936 By B. W. Fernando, Chapter II.
1939, Ceylon Government Press p.5-8
Contents Next Chapter III