How currency denominations are determined-The Renard Series

The RBI recently announced the introduction of the Rs.200 currency note and said that it would simplify getting change for larger- currency denominations.

So the question arises, why was it so important to have a 200-rupee note and how is currency denominations determined in the first place.

In order to determine currency denominations, various central banks globally follow variations of the Renard Series, a variation also called the 1-2-5 series, in which a ‘decade’ or a 1:10 ratio is covered in 3 steps. The first number in the series would be 1, the second would be 2, and the third would be 5. When extended, it would read 1,2,5,10,20,50,100,200,500,1000,…etc.

Thus the numbers in the 1-2-5 series are very conveniently arranged to simplify transacting with minimum amount of permutations & combinations. So if a person has a 10-rupee note and wishes to buy something worth Rs 3, he would be able to get his change in the form of a 5-rupee note or coin and a 2-rupee coin, instead of getting seven 1-rupee coins or three 2-rupee coins and a 1-rupee coin if the currency had not been denominated that way.

Among all available denominations, the Rs.200 note was the missing link in the Renard Series, a series of preferred numbers first proposed by French army engineer Charles Renard. Since India already had 1-rupee, 2-rupee, 5-rupee, 10-rupee, 20-rupee, 50-rupee, 100-rupee, and 500-rupee denominations, the 200-rupee note was added to complete the 100-200-500 part of the series.

Incidentally, India is not the only country that follows the 1-2-5 series to denominate currency. The Euro and the British pound are two of the most notable currencies that are denominated in the 1-2-5 series.

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Sabyasachi Paul has been associated with equity research and advisory on equity markets in India for over 9 years & currently heads the equity research desk of Eastern Financiers Ltd, Kolkata.He also manages a portfolio on the online platform Kristal. Find link to the strategy named 'The Tortoise' 

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