VI.-1796-1883. EARLY ISSUES: KREDIT BRIEVEN, RIXDOLLAR PAPER, STERLING NOTES AND BANK NOTES.
50. Kredit Brieven.-The First Paper Currency in Ceylon
Was issued by the Dutch in 1785, exactly a hundred years before the establishment of the present Government Note Issue. The notes were called Kredit Brieven and were payable to bearer on demand in Ceylon copper coin at the rate of 48 stuivers for each rixdollar. The first issue was dated May 10, 1785, and consisted of notes for RD 50, 100, 500, and 1,000, to the aggregate value of RD 25,000. Each note was in Dutch, Sinhalese, and Tamil, and signed by three officials. It had to be endorsed by the holder. The first issue was cancelled in April 1787. The second issue was in October 1785 and consisted of RD 5,10,20,50,100,200, and 500 notes. Third and fourth issues followed in December of the same year and May 1786, and thirteen issues were made between 1787 and 1795. In addition to these, there were two issues in 1789 and 1790 for use at Batticaloa and one issue in 1788 for use at Trincomalee. In 1796 cash notes of the following denominations were also issued: RD 1, 2, 3, 4, 5, and 10. In 1793 certain Kredit Brieven were found to have been falsified and rules were made to protect the public.
51. Kredit Brieven taken over by the British.
In accordance with Article 6 of the Capitulation of Colombo, the British took over from the Dutch in 1796 the notes which were then in circulation up to a limit .of £50,000 sterling and agreed to issue certificates for the amount bearing -interest at the rate of 3 per cent. payable half-yearly.
52. Kredit Brieven redeemed and Rixdollar Paper issued.
In March, 1800, currency notes, generally of the denominations of RD 100, 50, and 25, were issued by the British to the value of RD 30,000. This was followed by a second issue to the extent of RD 45,000 ; the Kredit Brieven being redeemed gradually 1. The notes were exchangeable at the Treasury on demand at 45 fanams or RD 3¾ to the Star Pagoda. The paper commanded. a small premium on account of its superior convenience to the copper money. In October 1801 the estimated note circulation was £10,000.
53. Further Issues. Counterfeitings.
Further issues followed and, in 1820, the paper currency amounted to nearly 2½ million rixdollars. Several counterfeits came to light and, in order to prevent forgery, Regulation 3 was issued in 1820, requiring the value of the note to be ~dded by means of a "dry stamp". This was not found satisfactory owing to the thinness of the paper and by Regulation 7 of the same year it was replaced by a stamp in black ink on the back of the note.
54. Withdrawal and Cancellation of Paper Rixdollars.
By Regulation 5 of 1823 the notes of the value of RD 1 were called in as from August 31 of that year. By Regulation 8 of the same year all notes of RD 50 and 100 of a date prior to May 5 were also withdrawn, owing to a theft at the Colombo Kachcheri. Between 1820 and 1825 nearly RD 866,016 in notes had been withdrawn. The note circulation in 1825 amounted to RD 1,561,669. .
55. Sterling Notes replace Paper Rixdollars.
When the Order in Council of March 23, 1825, introduced Sterling currency into all the Colonies, the local Government issued Regulation 8 of 1825 ordaining that public accounts should be kept in pounds, shillings, and pence. Regulation 8 of 1827 enacted that Government notes expressed in pounds payable in the currency of the Island "shall pass current at 20 shillings sterling" and a new paper currency to the extent of £90,000 was issued under this Regulation, expressed in terms of sterling money, the denominations being £ 1, 2, 5, 10, 20, 25, and 50. These 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 rate fixed by the Government. By Regulation 9 of 1827 all rixdollar paper (except RD 2 and RD 5) were withdrawn and on September 1, 1830, the latter too were called in. The note circulation at that date amounted to £110,858.
56. Privilege of Note Issue granted to Banks. Withdrawal of Sterling Notes issued by Government.
After the close of the Napoleonic Wars, Banks began to spring up in the Colonies, the chief inducement to their establishment being the power to issue notes and the profits arising. There from. In 1844 the local Government passed Ordinance No. 23 making it lawful for Banks, duly licensed, to issue on unstamped paper promissory notes for any sum amounting to £1 or upwards, each licence to be annual and subject to a half. yearly composition duty of 3s. 6d. for every £100 or fraction thereof, and to a stamp duty of £20 except where a Bank issued notes under the authority of a Charter or Letters Patent from the Crown. The Western Bank of India and the Bank of Ceylon (later incorporated under the title "Oriental Bank Corporation") and the Chartered Mercantile Bank of India, London, and China, issued notes under the authority of this Ordinance. On December 28, 1855, Governor Sir Henry Ward issued a Minute notifying,
"that the whole of the Treasury Notes in circulation on January 1, 1856, will be withdrawn as they came into the hands of Government and sent to England to be cancelled; and that in order to obviate any inconvenience that might arise from the withdrawal of the Treasury Notes in commercial transactions, the notes of the Oriental Bank which by its Charter of Incorporation has given what appears to Her Majesty's Government to be a sufficient security for their convertibility will be received at all Kachcheries in payment of amounts due to the Government, precisely as the Treasury Notes have been received hitherto."
Government Notes thus ceased to exist as a medium of circulation and, after their withdrawal the notes of the Oriental Bank Corporation and the Chartered Mercantile Bank only were in circulation in the Island. In 1861 Ordinance No. 23 of 1844 was repealed by Ordinance No.2
which authorized the two Banks mentioned above or any other Bank
authorized by Royal Charter or Letters Patent or named in any
Proclamation duly issued by the Governor, to issue notes for any sum
amounting to 10s. or upwards subject to the half-yearly payment of a
composition duty of 10s. for every £100 or fraction thereof of the
average amount of such notes issued and in circulation during such
half year.
The Dutch promissory notes taken over by the British Government in
1796, were never called in. The question of their redemption came up
for consideration during Sir Robert Peel's ministry when an
application was received in 1846, from a holder in England for the
payment of the face value (28,123 rixdollars) in sterling
(£2,109.4.6.) in respect of 237 Kredit Brieven and 120 cash
notes for which he was receiving annually £61. 7 .6¾. as
interest at the rate of 3 per cent. per annum less 3 per cent. premium
due to the Ceylon Government in consequence of the payment being made
in England. Mr. W. E. Gladstone then expressed the opinion that it was
obvious from the terms of the Capitulation that the holders of the
certificates given in lieu of the promissory notes of the Dutch
Government were not entitled to demand their redemption by the
Government and that Her Majesty's Government could not sanction a
compliance with the application.
The Government found that the promissory notes had depreciated in
value by 50 per cent. to 60 per cent., and published a notification
dated January 24, 1857, in the Gazette of the same date giving notice
that the holders of the Dutch Kredit Brieven and cash notes, on
presenting same at the Treasury, Colombo, would be paid at the rate of
£40 for every £100 of nominal principal. Thereafter most
of the notes were purchased by Government at 60 per cent. discount
and cancelled.
In 1894 negotiations were started with a view to paying off the
357 notes amounting to 28,123 rixdollars, the Government off erring
the holder 75 per cent. of their value in rupees (at 75 cents a
rixdollar) converted into sterling at 1s. 2d., current
rate of exchange; but the holder was not prepared to accept anything
less than the sterling value at 1s. 6d. a rixdollar as
originally fixed. In 1896 however on the death of the holder his heir
accepted an offer of £1,250 plus an annuity of £25 for
life and surrendered the notes.
There were still outstanding 122 Kredit Brieven and 8 cash notes
amounting to 18,887 rixdollars with four holders in Ceylon on which a
sum of Rs. 425 was being paid annually as interest out of the Public
Debt vote and, in 1907, the Treasurer proposed that these notes too
should be paid off. The Attorney-General (Sir Anton Bertram) whilst
stating that it was with the greatest diffidence that one ventured to
differ from such an authority as Mr. Gladstone thought that it was
possible that he did not minutely scrutinize the terms of the
Capitulation, and expressed the opinion (the Solicitor- General
concurring) that the liability to pay interest carried with it a
corresponding right to discharge that liability and that the
Government might payoff the notes at the face value. After obtaining
the approval of the Secretary of State and protracted negotiations
with the holders the Government bought in the 130 notes in 1912, for a
sum of Rs. 13,890 and cancelled them, thus wiping off finally a
permanent charge on public funds.
Ceylon Currency British Period 1796-1936 By B. W. Fernando, Chapter VI.
1939, Ceylon Government Press p.24-26
Contents Next Chapter VII