Question:
Why is Rupee accepted as a medium of exchange in India?
Why is Rupee accepted as a medium of exchange in India?
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Remember:
\[
\boxed{\text{Currency Notes} \Rightarrow \text{Issued by RBI on behalf of Central Government}}
\]
This legal authority makes the rupee acceptable as a medium of exchange in India.
Updated On: Jul 28, 2026
- Because it is issued by the Reserve Bank of India on behalf of the State Government.
- Because it is issued by the Reserve Bank of India on behalf of the Central Government.
- Because it is issued by the State Bank of India on behalf of the Central Government.
- Because it is issued by the Reserve Bank of India on behalf of the World Bank.
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The Correct Option is B
Solution and Explanation
Step 1: Understand medium of exchange.
A medium of exchange is anything that is generally accepted by people for buying and selling goods and services. In India, money in the form of rupee notes and coins performs this function.
Step 2: Legal authority of rupee.
The Indian rupee is accepted as money because it has legal sanction. It is issued by the Reserve Bank of India on behalf of the Central Government. Therefore, every person in India is legally bound to accept the rupee as a medium of exchange.
Step 3: Role of the Reserve Bank of India.
The Reserve Bank of India is the central bank of the country. It has the authority to issue currency notes in India, except one-rupee notes and coins, which are issued by the Government of India. RBI regulates the supply of money and maintains trust in the currency system.
Step 4: Eliminate the wrong options.
Option (A) is incorrect because the rupee is not issued on behalf of the State Government. Option (C) is incorrect because the State Bank of India is a commercial bank and does not issue currency. Option (D) is incorrect because the World Bank has no authority to issue Indian currency.
Step 5: Final conclusion.
Thus, the rupee is accepted as a medium of exchange in India because it is issued by the Reserve Bank of India on behalf of the Central Government. \[ \boxed{\textbf{(B) Because it is issued by the Reserve Bank of India on behalf of the Central Government.}} \]
A medium of exchange is anything that is generally accepted by people for buying and selling goods and services. In India, money in the form of rupee notes and coins performs this function.
Step 2: Legal authority of rupee.
The Indian rupee is accepted as money because it has legal sanction. It is issued by the Reserve Bank of India on behalf of the Central Government. Therefore, every person in India is legally bound to accept the rupee as a medium of exchange.
Step 3: Role of the Reserve Bank of India.
The Reserve Bank of India is the central bank of the country. It has the authority to issue currency notes in India, except one-rupee notes and coins, which are issued by the Government of India. RBI regulates the supply of money and maintains trust in the currency system.
Step 4: Eliminate the wrong options.
Option (A) is incorrect because the rupee is not issued on behalf of the State Government. Option (C) is incorrect because the State Bank of India is a commercial bank and does not issue currency. Option (D) is incorrect because the World Bank has no authority to issue Indian currency.
Step 5: Final conclusion.
Thus, the rupee is accepted as a medium of exchange in India because it is issued by the Reserve Bank of India on behalf of the Central Government. \[ \boxed{\textbf{(B) Because it is issued by the Reserve Bank of India on behalf of the Central Government.}} \]
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