PAPER MONEY BANK MONEY

45. PAPER MONEY
BANK MONEY
1.      Meaning
     Paper money refers to the ‘written promise’, which are freely accepted as a medium of exchange and freely accepted in settlement of claims.

2.      Features
(a)   It is a written promise to pay the bearer the ‘sum of money’.
(b)   It is freely accepted as a medium of exchange.
(c)    It is freely accepted in settlement of claims.
(d)   Promissory notes issued by prominent trading and financial institutions are paper money



3.      Examples
a)      Promissory notes of Trading and Financial institutions.
(a)   Currency notes issued by the R.B.I in the denominations of Rs. 5, Rs. 10, Rs. 20, Rs. 50, Rs. 100, Rs. 500, Rs. 1000.


Bank money refers to the ‘written promise’ of one commercial bank or financial institution to another in all sorts of economic activities.



(a)   It is a written promise of one commercial Bank to another in all settlements of payments at home and abroad.
(b)   Bank money is not legal tender. No one can be forced to accept Bank money
(c)    It is also called ‘Optional Money’.
(d)   Bank money is in the form of ‘negotiable instruments’.


Negotiable instruments such as cheques, demand drafts, bills of exchange, etc.