Sections 22 and 23 of the Reserve Bank of India Act, 1934 - Bank Notes and Issue Department
Sections 22 and 23 form part of the central-banking provisions governing currency issue. Section 22 gives the Reserve Bank of India the sole statutory right to issue bank notes in India, while Section 23 requires the issue of bank notes to be conducted through a separate Issue Department whose assets and operations are legally distinct from the Banking Department.
Section 22 - Right to issue bank notes
Section 22(1): The Bank has the sole right to issue bank notes in India. It may also, for a period fixed by the Central Government on the recommendation of the Central Board, issue Government of India currency notes supplied to it by the Central Government. Unless a contrary intention appears, the provisions of the RBI Act applicable to bank notes also apply to such Government of India currency notes as if they were bank notes.
The expression sole right to issue bank notes establishes RBI's statutory monopoly over the issue of bank notes in India. The additional wording concerning Government of India currency notes preserves the legal treatment specified in the Act for such notes where applicable.
Section 22(2) - Central Government not to issue currency notes
From the date on which Chapter III of the RBI Act came into force, the Central Government shall not issue any currency notes.
Subsection (2) complements RBI's exclusive note-issue power under subsection (1). The provision concerns currency notes within the statutory framework of the RBI Act and should be read with the Act's other currency provisions.
Current law - Section 22A and digital bank notes
Section 22A, inserted with effect from 30 March 2022, provides that Sections 24, 25, 27, 28 and 39 do not apply to bank notes issued in digital form by RBI.
Section 22A is positioned between Sections 22 and 23 in the current Act. It is relevant to a modern reading of the note-issue framework because it expressly recognises bank notes issued in digital form and disapplies the specified provisions to them. It does not remove Section 22's core rule that RBI has the sole right to issue bank notes.
Section 23 - Issue Department
Section 23(1): The issue of bank notes must be conducted by RBI in an Issue Department. That department must be separated and kept wholly distinct from the Banking Department. Its assets are not subject to liabilities other than the liabilities of the Issue Department as defined in Section 34.
The Issue Department is therefore the statutorily separated part of RBI through which bank-note issue is conducted. The requirement that it remain wholly distinct from the Banking Department creates a legal and accounting separation between currency-issue functions and RBI's banking operations.
Issue Department liabilities under Section 34
Section 23(1) expressly refers to Section 34. Under the current statutory framework, the liabilities of the Issue Department are defined by Section 34, which links those liabilities to the amount of Government of India currency notes and bank notes for the time being in circulation.
Section 23(2) - When may the Issue Department issue bank notes?
The Issue Department may not issue bank notes to the Banking Department or to any other person except in exchange for other bank notes or for coin, bullion or securities that the RBI Act permits to form part of the Reserve.
This provision connects the issue of bank notes with the statutory reserve framework. It prevents the Issue Department from issuing notes to the Banking Department or another person outside the forms of exchange permitted by the Act.
Reserve assets and Section 33
Section 23 should also be read with Section 33, which governs the assets of the Issue Department. The statutory structure links currency issue to specified reserve assets, while Section 34 identifies the corresponding Issue Department liabilities.
Difference between the Issue Department and Banking Department
- Issue Department: conducts the issue of bank notes and holds the statutory reserve assets associated with that function.
- Banking Department: conducts RBI's banking operations under the wider powers and duties conferred by the Act.
- Legal separation: Section 23 requires the Issue Department to be separated and kept wholly distinct from the Banking Department.
- Asset protection: Issue Department assets are not subject to liabilities other than the liabilities statutorily attributed to that department.
Key legal points under Sections 22 and 23
- Exclusive issue power: RBI has the sole right to issue bank notes in India.
- Government currency notes: Section 22(1) contains a statutory mechanism for RBI to issue Government of India currency notes supplied by the Central Government for a period fixed in the manner stated in the section.
- Central Government restriction: Section 22(2) prohibits the Central Government from issuing currency notes after the commencement of the relevant Chapter.
- Digital form: current Section 22A excludes digital bank notes from Sections 24, 25, 27, 28 and 39.
- Separate Issue Department: bank-note issue must be conducted through an Issue Department kept wholly distinct from the Banking Department.
- Issue Department liabilities: Section 23 expressly links the department's protected assets to the liabilities defined in Section 34.
- Permitted exchange: notes may be issued from the Issue Department only in exchange for other bank notes or qualifying coin, bullion or securities permitted to form part of the Reserve.