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Do you know? After independence, India printed currency for Pakistan for almost a year.

In India, Independence Day is celebrated on August 15, when the country gained freedom from oppressive colonial rule in 1947 after decades of struggle and sacrifice.  Besides resulting in the division of the subcontinent into two parts – India and Pakistan – the end of British rule were also responsible for the beginning of an independent nation. An outbreak of violence over the division of territories, powers, and assets marked the Partition.

Have you ever wondered how the nations functioned immediately after partition, especially Pakistan since it did not have a central bank? Due to the partition, there were a number of delicate issues to resolve, including currencies, coinage, exchanges, public debt, staff transfers, property transfers, and division of assets, profits and liabilities.  Upon accepting in principle Partition, the interim government appointed a special committee of Cabinet to examine the administrative consequences of Partition and take the necessary steps to transfer power to the two Dominions.  As of July 1, 1947, the Committee was replaced by the Partition Council, which was headed by the Governor-General and comprised of two representatives each of the Indian National Congress and the Muslim League.

It is interesting to note that the Reserve Bank of India provided currency to newly-established Pakistan and also served as the central bank until the State Bank of Pakistan took over.  After the formation of Pakistan, the Indian Rupee was the first currency to be used in the country with the words ‘Government of Pakistan’ printed in English and ‘Hakumat-e-Pakistan’ printed in Urdu on the white area.

According to RBI documents, the bank was to serve as the currency authority for Pakistan and serve as a banker to Pakistan’s central and provincial governments until the end of September 1948. Until the end of March 1948, the bank was also responsible for managing Pakistan’s exchange control and public debt. The orders also stated: ‘The Bank was to be the sole issuer of notes in Pakistan until September 30, 1948. After that date, Indian currency would no longer be legal tender in Pakistan, but from April 1, 1948, notes would carry the Government of Pakistan’s inscription in English and Urdu’.

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It was agreed that the existing currency and coinage would remain common to both territories until March 31, 1948. The following six months (April-September) would be a transitional period, during which only Pakistan overprinted notes would be issued in Pakistani areas, but India notes already in circulation in Pakistan would remain legal tender. Pakistan’s new design coins will be minted from March 1, 1948, and will be issued in Pakistan from April 1, 1948.  Three months early than the scheduled date, the Reserve Bank of Pakistan ceased to operate as Pakistan’s central bank on July 1, 1948.

 

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