How the Rajas of India lost control of their right to coin money

Native Coins were gobbled up by the stronger British Rupee leading to London framing India's monetary policy for the next five decades

May 31, 2025

Hi there,

There was a time in the Indian subcontinent, where multiple currencies used to compete against one other. The British Rupee, the elder cousin of the current Rupee ₹, was not dominant, yet.

Today’s article is the story of how and why the British Rupee became the main currency across the Indian Empire and how that changed the relationship between the colonizer and the people of the princely states.

Let’s go,

A buffet of native currencies

During the 19th century, managing multiple currencies was part of life for peasants and merchants across the subcontinent.

The "right to coin" was deeply linked with the Maharaja's right to rule over his people. The sikka (coin) was a symbol of power and prestige.

Silver was the dominant standard in Asia and the Indian Ocean world, being more affordable and available than gold.

For centuries, these silver coins had fulfilled the commercial, social, and ritual needs of money and held a proud place as the principal store of wealth.

But within four decades, this diversity would vanish. This transformation would reveal how through economic control the British dominated the subcontinent.

In 1869, forty-two princely states were issuing their own currency, by 1893, twenty-seven states, by 1905 fewer than ten states issued currency with circulation limited to their own states.

Many coins were popular within and outside their own states.

The British Empire in India, 1909 Source: Wikipedia See in yellow in the center slightly to the left Rajputana Agency, below that the Central Indian Agency, to its left Gujarat and Kathiawar

The Rulers of Orchha in Central India issued the Gajashahi rupees, which were also used in the neighboring cities of Indore and Gwalior, throughout the Bundelkhand region, and even in nearby British Indian districts of Lalitpur and Jhansi. In these districts, two-thirds of land revenue taxes were paid in them.

According to the Jhansi land revenue settlement report of 1893, 'it would be impossible, except by harsh and repressive measures, to drive the Orchha coin out of the market and to replace it by the British rupee'.1

The influence of these currencies extended beyond the subcontinent as well.

The Salimshahi rupees of Pratapgarh in Rajputana served as the main coin across several states in Central India and Rajputana, while the koris of Kutch traveled as far as Zanzibar, Madagascar, and ports in the Red Sea and Persian Gulf.

The Kutchi kori had been coined since 1510. Since 1827, it had remained stable against the British rupee at 379 koris to 100 rupees. This stability made it a trusted store of value for merchants operating across the Indian Ocean trade networks.

Similarly, the Babasai rupees minted in Baroda, in western India, were used in many adjoining British Indian districts.

The borders were porous. The British rupee circulated in many princely-ruled states, especially along borders and railway lines, while native coins were popular in adjoining British Indian districts. The rupee was merely one among many coins, mainly used to pay British taxes.

The colonial government could not avoid paying its own troops and suppliers in native coin, continuing as late as 1897 to employ indigenous bankers as ‘regimental treasurers’ to transact government business across different currencies.

Money exchangers acted as bankers and established links across state lines, facilitating trade in native coin and British rupee. These bankers played a vital role in price discovery of coins by keeping an eye on circulation, minting by rulers, purity of the coin and demand of coins relative to another.

London’s Silver Problem

In June 1893, London severed the link of the British Rupee with silver.

Before this decision, there was a set purity and weight of silver in each rupee which influenced its value. The price of the coin was derived from its silver metal content.

Between 1873 and 1892, over a period of twenty years, silver was falling in price relative to gold. Silver prices were falling due to a global shift away from silver-backed currencies, gold deposits being found and declining silver demand from key markets like China.

In 1891, one rupee was worth 18 pence, and in early 1892 it was worth 15 pence2. This fall in value caused problems,

With silver falling in value, the rupee was fast becoming an unreliable medium of exchange. So, exporters preferred to accept payment directly in silver bullion, eliminating the need for the rupee. This lack of demand for the rupee added to its fall in price.
The colonial government had to make payments on its sterling debt, and in 1894, its annual charge payable was ~£7.4 million. The authorities faced a payment crisis as receipts from Indian currency were at the mercy of currency exchange fluctuations while payables were fixed on gold-based sterling3.

The decision to break away from silver did not mean coins were now struck in gold. Silver coins were still accepted currency. New coins would still be made in silver. What changed was the monetary system; the rupee's value would no longer be dependent on the price of silver.

The colonial authorities aimed to arrest the rupee’s decline. They hoped the rupee would become stable vis-à-vis the gold-based sterling.

The Government would now strike new rupee coins at its sole discretion. One could no longer take silver bullion to a government mint and have it struck into British Rupees.

In the next six years, almost no new rupee coins were struck.

The limiting and even removing (some old coins were melted back into silver bullion) of currency in circulation and increase in demand for rupees for purchase of grain during the famine of 1897 helped the authorities to better the exchange rate.

The British were successful with their efforts. In January 1898, the rupee stabilised at 16 pence.

In 1899, six years after the break from silver, the colonial rupee was officially pegged to gold. Its value was set at 15 rupees to 1 British sovereign.

But, before the rupee could become the main currency of India, it had to defeat the dozen powerful Native Coins.

Ramping up pressure on the native coins

To boost the usage of the rupee and extend its influence, it became essential to constrain the use of native currencies. The colonial authorities chose the currencies they would target strategically.

Loading a Bombay Cart, Source: Paper Jewels

Pratapgarh's Salimshahi and Orchha's Gajashahi, due to their large circulation, became the first targets of colonial intervention.

In April 1894, the Salimshahi rupee had fallen ~7% below the rate fixed for tribute payment. The Rajputana states paid tribute to the British in Salimshahi rupees, and the fall in price pinched the colonizers’ pocket. This bolstered the authorities to pressure the Pratapgarh mint to stop fresh coinage.

In the same month, when the Gajashahi rupee was still within its historical range against the British rupee, Orchha faced similar pressure and suspended coinage.

The message was clear. The British would be coming for the native currencies.

Some battles are easily won: The Bhopali Hali Sikkas

Bhopal, located in the heart of India, was compelled by the currency markets to substitute its Hali sikkas for British Rupees.

Bhopal faced large annual payments to the British, for railway projects, for the upkeep of the Bhopal battalion of the British Indian Army, and for a new imperial cavalry regiment. Considering these commitments, volatility against the British rupee could result in a higher than anticipated payment.

In July 1893, the state suo-motu decided to cease fresh coinage and followed a cautious budgetary policy. Nevertheless, its large liabilities to the British weighed on the Hali sikka, which began depreciating against both the rupee and the neighbouring Gwalior and Indore sikkas.

In November 1893, Bhopal asked the colonial government to replace its sikkas with the colonial rupee. The request reflected the state’s anxieties for the future of its currency as well as misgivings about its ability to reconcile economic autonomy with fiscal and monetary stability.

The status of Bhopali Hali Sikkas was left open for a year, where it depreciated further. A settlement was finally made wherein 124 sikkas were exchanged for 100 British Rupees (124:100), a worse rate than a year prior where the official rate was 110 sikkas in exchange for 100 rupees (110:100).

In a brazen act, the colonial authorities permitted Bhopal to convert rents and land revenues at 110:100. This enabled landowners, revenue farmers, and the state treasury to make substantial windfall gains while the peasantry was stuck with the worse rate of 124:100. The reason given was that there was no ‘reason to give the benefit’ of the lower rate to the cultivator, who, if dissatisfied, could ‘throw up his lease, as, all the settlements being temporary, no one has ...permanent interest in his farm.’4

The slow death of native currency

Gwalior was the largest state in Central India with a population of three million. The authorities of Gwalior had carried out ‘extraordinary manipulation of coinage,’ as colonial officials described it, by paying out salaries and other expenses in one coin but refusing the same coin for revenue receipts. The state issued three main coins, and it manipulated the coins relative to each other to bolster its exports while making imports more expensive, thereby straining the finances of the locals.

In 1898 faced with the fallout of a famine, Gwalior’s ruler, the 21-year-old Madho Rao Scindia, was unable to continue the charade. He decided to suppress all three coins at a stroke and replace them with the British rupee.

Similarly under pressure, Baroda’s Babasai rupee underwent rapid depreciation. To stem losses, Baroda decided to adopt the British rupee. The state was a valuable prize, marking a milestone in the colonial rupee’s rise.

It is important to note that at this time, London’s move to separate the rupee from silver was unique. The Indian rulers couldn’t switch to a gold-based currency because they didn’t have enough gold reserves to support such a move, neither did they have influence over external and internal Indian trade as London did, and they lacked the political freedom to make such a decision against the imperial agenda.

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Famine cements the change

In 1899, a disaster changed the circumstances prevailing in the subcontinent.

Group of famine-stricken victims Source: Paper Jewels

The twin droughts of 1896-1897 and 1899-1900 were followed by famine, with the second considered the worst hunger crisis of the century.

The famine was most acute in Western and Central India, including the princely states of Rajputana, Central India and Gujarat. These were also the areas where the native currencies were dominant.

The daily wage farm laborers were hit the hardest, losing their source of employment.

One estimate states that 43 million of the 85 million victims of the drought of 1899 lived in the princely states. These figures equaled two thirds of the population of the princely states as per the census of 1891. So severe were the ramifications that the population of the states in Rajputana and the Central India Agency fell by almost a fifth between the 1891 and 1901 censuses.

To feed the poor masses, grains and other critical items had to be imported from British India. Foodstuff was available but was expensive. Almost no new rupees had been coined between 1893 and 18985; this planned scarcity had boosted the rupee's price.

Some states tried to respond by minting more coins, as they had done before.

But this traditional response, which had once allowed rulers to push through relief measures and ensure the poor were cared for, now only hastened the collapse of their currencies in the new monetary order. More money chasing the same goods simply drove down the value of their coins relative to the artificially scarce British rupee.

Kotah and Jhalawar (part of Rajputana) increased their coinage to finance famine expenditure. This led to their currencies falling by 20% between 1899 and 1900.

However, some states left their citizens to fend for themselves. The ruler of Indore vetoed all relief expenditures.

Jodhpur’s Bijeyshahi rupee began to slide, declining about 10 percent by the middle of 1899 and a further 10 percent by November 1899. This decline was principally because of ‘large imports of grain from British India’. The main reason for these imports was the high number of those on famine relief: ninety thousand, in a population of two million (5%).

Jodhpur completed its switch to the British rupee by the end of 1900.

More states now joined the procession. They included Kotah and Jhalawar in Rajputana, and Navanagar, Radhanagar and Cambay in western India.

The growing popularity of the rupee affected the demand for other coins. For example, an Indore minister remarked on the plight of Indore’s Hali sikkas, “Since the adoption of the British currency by the adjoining States during the last few years, the Hali rupee has no circulation outside Indore State that the Darbar know of.”6 This led to its persistent weakness after the twin droughts. The state adopted the British rupee.

The new monetary order

The native currencies continued circulating, but their days were numbered with no fresh coinage. It was not like the demonetization of 2016, where notes were pulled out of circulation; it was a slow process where the demand for native coins faded out.

Between 1893 and 1905, the colonial administration successfully blocked the circulation of almost all native coins.

The Rajas and Maharajas of the Princely States stopped fresh coinage and adopted the British Rupee as the principal currency in their states, in effect giving up control over monetary policy.

The states which had not given up their right of coinage, minted gold coins but only for ceremonial uses. And a few states such as Hyderabad, Jaipur and Kutch who were able to hold on to their currencies, saw the circulation limited to within their territories.

In 1918, Hyderabad was the only state permitted to issue banknotes due to the acute shortage of silver during the First World War.

This surrender had profound implications beyond mere currency exchange. Before, during times of crisis such as drought, famine or flood, rulers could push through relief measures by increasing money supply through additional minting, ensuring the poor were cared for. They could influence trade by making currency more expensive through limited coinage or cheaper through increased minting.

But now, they could no longer manipulate their currency. This bound their state to the fortunes of the British and bridged the gap to British India.

Furthermore, the colonial authorities were asserting their suzerainty over the Princely States through the rise of the British Rupee. The sikka (coin) was associated with the strength of a dynasty and their right to rule. The British co-opted this symbolism; if these rajas were kings, then the Queen of India was the ruler of kings.

The Crown also profited immensely from minting coins for the empire, extending its control through currency management. Payments for "leases" with rulers of Jaipur and Jodhpur, taking over saltworks, and taxes collected across the subcontinent were all made in British Rupees.

The forty-two princely currencies of 1869 had become a footnote in history, victims of a systematic campaign that used silver crisis, political pressure, and natural disaster to achieve what military conquest alone would have found difficult to accomplish - the complete financial subjugation and integration of the subcontinent.

My thoughts

Could multiple currencies based on silver have continued into the 20th century?

There isn’t a clear-cut answer. Falling silver prices would have put pressure on all native currencies, eventually wiping some of them out. Still, it’s possible that stronger states might have found ways to maintain their own currencies and perhaps even attract a broader regional audience for their coins.

However, this raises a larger question: would such a system have benefited the India we know today? With the introduction of a unified currency, the British provided a common system, much as English bridged the linguistic divide. This integration may have eased the challenges faced by our national leaders after Independence, as a single currency across the country ensured greater economic cohesion.

References

If you want to know more about the coins minted by the Princely States, I highly recommend this book→ The Raj and The Rajas Money and Coinage in Colonial India by Sanjay Garg

For more context on the problems faced by the native currencies read this paper→ Debasing Indigenous Statehood: Sovereign Monies, Markets and Imperial Power in the Indian Subcontinent, c 1893-1905.

P.S. Hey, thank you for making it till here! All the articles on Filtered Kapi take a lot of time, love and care to write. Tell me what you liked, enjoyed, disagree with by leaving a comment so that I know you exist, and I don’t feel like I am a weirdo talking into the void!

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