When Pakistan used notes printed by Reserve Bank of India

After being ruled by the British Empire for almost 200 years, the partition of India into the new Dominions of India and Pakistan, in 1947, posed several delicate problems. One of them being that Pakistan didn't have its own central bank. 

Following the acceptance in principle of partition, a special committee of Cabinet was set up which was later replaced by Partition Council. The Reserve Bank of India acted as an advisor to the expert committee set up to divide resources and institutions between India and Pakistan by providing them data and technical expertise. 

There were serious disagreements between the two newly formed Dominions.

• The Muslim members felt that the Pakistan government should have the right to appoint a deputy governor of the RBI Bank
• It should also directly nominate 2 out of 4 nominated directors on the RBI's central board; among others.

Under the Pakistan (Monetary System and Reserve Bank) Order 1947 system issued on August 14, 1947, the Reserve Bank of India took control of Pakistan's monetary system. This order provided for the RBI to operate as the currency and monetary manager for Pakistan until 30 September 1948.

It was finally decided that there will be common currency within both countries, issued by RBI, until March 1948. Indian currency notes and coins, over-stamped with 'Government of Pakistan' title were used as legal tenders in the new state of Pakistan.

After a series of disagreements and issues, relation between the Pakistan authorities and the RBI were strained. RBI signed an agreement with the Pakistani government to terminate their relationship, and Pakistan assumed control over its finances from April 1948.

On April 1, 1948, the RBI and the Government of India issued provisional notes on behalf of the Government of Pakistan, exclusively for Pakistan.
RBI ceased to function as Central Bank of Pakistan from July 1948, and its functions were taken over by the newly established State Bank of Pakistan.

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