Act No. 24 of 1861

Act No. XXIV (Act No. 24) of 1861 (Repealed)

Repealed by Act No. III (Act No. 3) of 1871

Passed by the Legislative Council of India.

(Received the assent of the Governor-General on the 31st August 1861.)

An Act to enable the Banks of Bengal, Madras, and Bombay to enter into arrangements with the Government for managing the issue, payment, and exchange of Government Currency Notes and certain business hitherto transacted by the Government Treasuries.

Preamble

WHEREAS it is expedient to authorize the Banks of Bengal, Madras, and Bombay to enter into the agreements and arrangements, hereinafter mentioned; it is enacted as follows:

Banks may enter into certain arrangements with Government

Section 1. It shall be lawful for any of the said Banks, by agreements under their corporate seal, in enter into agreements or arrangements with the Secretary of State for India in Council through the Governor-General of India in Council, the Governor of Madras in Council, and the Governor of Bombay in Council respectively, for superintending, managing, and becoming agents for the issue, payment, and exchange of Promissory Notes of the Government of India, payable on demand under Act XIX of 1861 (to provide for a Government Paper Currency) or any Act which may hereafter be passed in relation to the Paper Currency of the Government of India; for the carrying on the business of an Agency of issue under the said Act XIX of 1861 in any circle of issue in which any of the said Banks shall have established a Branch Bank under Act VI of 1839 (relating to the Bank of Bengal) or any other Act; and for transacting any part of the business of, or hitherto generally transacted by, or at the General Treasuries of the Governments at the several Presidencies of Fort William, Madras, and Bombay respectively.

Banks may transact the business incident to such arrangements

Section 2. It shall be lawful for the said Banks of Bengal, Madras, and Bombay, in addition to the modes of business in which they may now by law be respectively engaged, to transact, in accordance with the provisions of the said agreements or arrangements entered into under Section I of this Act, all or any of the business appertaining to the superintendence, management, or agency for the issuing, payment, or exchange in the first Section mentioned and the business of an Agency of issue under the said Act XIX of 1861 in any, such circle of issue as aforesaid, or all or any of the business of, or hitherto generally transacted by, the General Treasuries in that Section mentioned.

Explanatory Note

Overview

Act No. 24 of 1861 was a short but significant piece of colonial legislation. Enacted shortly after the Paper Currency Act, 1861 (Act 19 of 1861), this Act was designed to formalize the role of the three Presidency Banks—Bank of Bengal, Bank of Madras, and Bank of Bombay—in managing certain governmental financial operations, particularly the issue, payment, and exchange of Government currency notes.

Purpose of the Act

The Act aimed to:

• Authorize the three Presidency Banks to enter into agreements with the Government of India.

• Delegate certain treasury functions—traditionally performed by Government Treasuries—to these banks.

• Facilitate the management of the newly introduced Government paper currency system, established under the Paper Currency Act of 1861.

Key Provisions

Section 1 – Power to Enter into Arrangements with Government:

Each of the three banks was permitted to enter into formal agreements (under their corporate seals) with the Secretary of State for India in Council.

These agreements could authorize the banks to:

• Act as agents for the issue, payment, and exchange of Government promissory notes (currency notes).

• Operate as an Agency of Issue under the Paper Currency Act, 1861, in any area where the bank maintained a branch.

• Undertake treasury functions previously carried out by Government Treasuries at Fort William (Calcutta), Madras, and Bombay.

Section 2 – Authorization to Conduct Treasury-Related Business:

• This section formally expanded the permissible scope of business for the Presidency Banks.

• It permitted them to perform all roles involved in managing currency notes and function as extensions or replacements of the General Treasuries.

Significance

Act No. 24 of 1861 formed part of a broader transition from private and semi-private banknote issuance to a centralized Government paper currency system. It recognized the administrative and logistical advantages of involving the well-established Presidency Banks in managing the issuance, payment, and exchange of Government currency notes, as well as performing certain treasury functions. By authorizing these banks to undertake currency operations, the Government effectively outsourced key financial responsibilities to trusted institutions with established infrastructure and capabilities, enabling a more efficient and organized implementation of the new currency framework.

Repeal and Legacy

The Act was repealed in 1871 by Act No. 3 of that year, as part of a broader consolidation and simplification of financial legislation. However, its legacy persisted in the form of continued Government–bank partnerships in currency management, ultimately leading to the establishment of the Reserve Bank of India in 1935.

Conclusion

The Banks of Bengal, Madras, and Bombay Act, 1861 was a strategic step in the evolution of India's financial system under British rule. It helped bridge the transition from fragmented note issuance to a unified Government currency, with the trusted involvement of the Presidency Banks in administering this transformation.