Though peace had been restored by the Peace of Paris Treaty of 1784 and Trincomalee had been given back to the Dutch, annual expenses had constantly exceeded revenue. The Treasury was exhausted by the maintenance of additional troops since 1780. Governor van de Graaff in 1785 for the first time in Ceylan issued paper currency to overcome these financial difficulties. They consisted of treasury notes termed 'kredit brieven' and were made payable to bearer on presentation in Ceylan copper coin at the rate of 48 stuivers for each rix-dollar. The lowest denomination was 5 rix-dollars and were freely convertible at the Treasury on demand. These notes were not meant to replace copper coins.
By 1796 England declared war and took over a depleted Treasury.
When the British arrived in Lanka the monetary circulation comprised of depreciated paper currency of two varieties viz. kredit brieven, the lowest denomination of Which was five rix-dollars and the kas-nooten, where the denominations ranged from one to five rix-dollars. Silver and copper coins were scarce as they were at a premium. It had been decided that the new rulers will honor the out-standing kredit brieven and kas-nooten notes. These notes were gradually withdrawn from circulation.
As copper coins alone could not satisfy the economy, Governor Frederick North issued in March 1800, currency notes to the value of Rix-dollars 30,000, convertible into copper on demand at the Treasury in the denominations of rix-dollars 25 and upwards. Subsequently, other issues of currency notes were made. With a view to satisfy transactions of less than 25 rix-dollars.
On August 1823 the one rix-dollar notes were withdrawn from circulation.
The Imperial Government Treasury issued a Minute dated February 11th, 1825 recommending the issue of British subsidiary silver coins as the standard coins for its Colonies. This Minute led to an Order in Council dated March 23rd, 1825 and was enforced in Ceylon by Regulation 8 of July 4th 1825. The Ceylon Gazette of July 5th 1825 contained the following provisions among others:
i. All Government accounts and transactions were required to be kept in British denominations of pounds, shillings, pence and farthings.
In 1884 with the failure of the Oriental Bank Corp6ration, the Government of India closed its mint to the public due to adverse effects of a depreciating rupee. A Commission headed by Sir Alexander Swettenham was appointed in 1893 to inquire into the effects on Ceylon and to suggest a suitable course of action. The Commission recommended that Ceylon currency be kept in step with the Indian currency and the latter was being steered towards the gold standard, During the period 1893 to 1899 both countries considered the rupee at the par rate of 16d.
Paper currency first issued by the Dutch dated May 10th, 1785 was termed kredit brieven and was expressed in rix-dollars in the denominations of 50, 100, 500 and 1000 rix-dollars. This issue was chiefly necessitated by budgetary difficulties and partly due to the scarcity of gold and silver coins. Further, copper coins, the chief media of circulation, was cumbersome for large payments and was found inconvenient and unsafe. The kredit brieven notes taken over by the British in 1796 bore interest at 3% and were well accepted. They were subsequently issued in the denominations of 20, 10 and 5 rix-dollars. In 1795 the war led to the issue of notes called kas-briefjes or kas-nooten in the denominations of 1,2,3,4 & 5 rix-dollars and were redeemable 'in the same manner as kredit brievens but were not required to be endorsed while passing in exchange.
The British first issued paper currency in March l800 in the denominations of 25, 50 and 100 rix-dollars. Like the kas-nooten notes these notes bore no interest and were exchangeable for copper on demand at the Treasury at the rate of 48. stivers to a rix-dollar. By 1823 the Secretary of State directed the Governor to withdraw all rix-dollar notes and introduce instead British subsidiary silver coins and sterling notes of not less than &1/- in denomination. By Ordinance No. 23 of 1844 private banks if they so desire could enjoy the privilege of notes issue upon the payment of an annual fee of &20/-. The Bank of Ceylon founded in 1841 and the Western Bank of India were amongst the first to make use of this facility. The Oriental Bank Corporation and the Chartered Mercantile Bank founded in 1851 and 1858 respectively also issued currency notes. With the issue of notes by private banks the Government saw no reason to continue its own issue of notes and by a Minute of the Governor dated December 28th, 1855 all government notes were made receivable at kachcheries. The Oriental Bank Corporation failed in 1884 thoroughly shaking the economy and causing near food riots and almost the failure of the Chartered Mercantile Bank. As a preventive temporary measure, the Government guaranteed the notes issued by the bankrupt Oriental Bank Corporation The final result was the introduction of the Paper Currency Ordinance of 1884 whereby a Board of Commissioners called the Commissioners of Currency was appointed comprising of the Colonial Secretary, the Treasurer and the Auditor General, who were entrusted with the issue and management of currency in Ceylon.
The Commissioners of Currency issued currency notes in the denominations of Rs. 5/-, 10/-, 50/-, 100/-, 500/- and 1000/- which were of unlimited legal tender value and these notes were redeemable at their offices in Colombo on demand in silver rupees of India. The Government guaranteed notes of the Oriental Bank Corporation were required to be exchanged for notes issued by the Board of Commissioners of Currency on or before March 31st 1885. By amendment to the Currency Ordinance in 1914 the Commissioners of Currency were empowered to issue one and two rupee notes.
Source: 1. Ceylon Currency and Banking - B.R.Shenoy 3. Ceylon Currency - Leelananda Caldera 4. Ceylon Currency British Period - B.W.Fernando
Currency Museum Circular No 7,
Central Bank of Ceylon.
15th March, 1984