WWII Impact on British Burma Banknotes

The profound WWII Impact on British Burma Banknotes is a crucial chapter in monetary history. Continuing our comprehensive series on Burma's fascinating monetary history, following our detailed analysis of the King George V overprint banknotes and the distinctive King George VI RBI Burma Peacock banknotes, we now delve into how World War 2 (WWII) brought immense changes and challenges to British Burma. The conflict not only altered the political and social landscape but also had a profound impact on its financial and monetary systems, specifically affecting its currency. This exploration will cover how the pivotal legislation like the 1940 Currency Act and the Japanese invasion shaped these notes, marking a truly tumultuous era in their monetary history. We'll also examine the various types of India and Burma notes used in 1942 and the subsequent, often deliberate, destruction of currency that defined the region's financial landscape.

Pre-War Currency in British Burma

Before the outbreak of World War 2, Burma, under British colonial rule, had its currency system deeply intertwined with that of British India. The introduction of King George VI banknotes in 1938 and 1939, discussed in our previous article, marked a significant development in Burma's monetary history. These banknotes, issued by the Reserve Bank of India, featured denominations of 5, 10, 100, 1,000, and 10,000 rupees. Alongside these Burma RBI issues, there were also other Burmese and Indian paper money used in Burma at that time, which will be discussed further in this article.

The Currency Act, 1940

One of the most interesting but least talked about legislature in the history of Indian and Burmese paper money is the Currency Act, 1940 [Burma Act No. XVI of 1940] dated 13 September 1940. This act to render the Government of India one rupee note legal tender in Burma, which extended to the whole of British Burma, was driven by the need to supplement the shortage of coins as a result of World War Two. Section 2 of the Act provides that:

Notwithstanding anything contained in the Reserve Bank of India Act, 1934, notes of the denominational value of one rupee issued by the Government of India shall be current in British Burma in the same manner and to the same extent and as fully as the silver coin which is “India rupee coin” as defined in paragraph 2 of the India and Burma (Burma Monetary Arrangements) Order, 1937, shall be legal tender in British Burma for the payment of any amount, and shall be deemed to be included in the expression “rupee coin” for all the purposes of the Reserve Bank of India Act, 1934.

The 1940 Currency Act was a significant legislative development that allowed the use of the Indian one-rupee banknote, particularly King George V 1935 Government of India one rupee banknote, as legal tender in Burma. It is important to note that the Reserve Bank of India Act of 1934, as amended in 1936, did not permit the Reserve Bank of India to issue one rupee banknotes and according to the Currency Ordinance, 1940 of India, Government of India 1 Rupee Note shall be deemed to be included in the expression “rupee coin” for all the purposes of the RBI Act, 1934 and shall not be treated as currency note. Consequently, the Reserve Bank of India was unable to issue a 1 Rupee note. If a 1 Rupee note were to be issued, it would have had to be done by the Government of Burma, but this option was not pursued.

There is a compelling evidence of the continued use of the 1935 KGV 1 Rupee banknote during World War II. This evidence is found in the form of banknotes bearing Japanese occupation stamps, or "chops." These marked banknotes are fascinating relics that offer a glimpse into the tumultuous period that encapsulates a unique convergence of British colonial history and Japanese wartime invasion. In addition, the early prefixes of the black serial number of 1940 KGVI 1 Rupee banknote, issued on 24 July 1941, were also used in Burma.

Various Types of Notes Used in 1942

In early 1942 before the Japanese invasion, British Burma saw the circulation of a variety of banknotes, prominently featuring both Indian and Burma notes. The coexistence of Indian and Burma notes created a unique economic environment and played a critical role in the economic landscape of the region during World War II until the Japanese invasion. In fact, according to the various legislations, including, the Currency Act, 1940 [Burma Act No. XVI of 1940] mentioned above, there were five kinds of paper money, all liabilities of the Reserve Bank of India, that were legal tender in Burma in 1942. Three of them were British India banknotes, while, the other two kinds were British Burma banknotes.

British India banknotes:
(1) Government of India banknotes issued before 1938 (i.e. uniface banknotes and King George V banknotes of India)
(2) Reserve Bank of India banknotes (i.e. King George VI banknotes of India)
(3) Government of India King George V and King George VI 1 Rupee banknotes

British Burma banknotes:
(1) Government of India King George V banknotes overprinted with the text "Legal Tender in Burma Only"
(2) Burma banknotes issued by the Reserve Bank of India

Under the arrangements, the Government of India paper money issued before 1938 (other than the 1 Rupee note) and the Reserve Bank of India paper money were set to cease being legal tender in Burma by 31 March 1942. The only Indian banknotes that would remain legal tender in Burma would be the one rupee banknotes specifically permitted to supplement the limited supply of silver rupee coins as stipulated in the 1940 Currency Act. This plan was intended to streamline and stabilize Burma's monetary system. However, the rapid and unexpected Japanese invasion disrupted these plans completely. The invasion not only halted the implementation of the new monetary regulations but also plunged Burma into a period of chaos and uncertainty.

Japanese Invasion of Burma

During World War II, Burma became a critical theater of conflict soon after the attacks on Singapore and Malaysia, as well as the Japanese alliance with the Thai government. On 15 December 1941, the Japanese military launched an assault on Victoria Point, the southernmost tip of Burma, swiftly capturing it on the next day. This marked the beginning of a rapid and decisive Japanese advance into Burma later that month, including, air raids on Rangoon.

By January 1942, Japanese troops crossed into Burma from Thailand, swiftly advancing through strategic points and capturing key cities. The fall of Rangoon in March 1942 dealt a severe blow to British defenses and disrupted crucial supply lines, effectively isolating British and Allied forces further inland.

The invasion prompted a significant exodus of refugees, with many fleeing to neighboring India under perilous circumstances. In response to the invasion and the deteriorating situation in Burma, the Burmese colonial government and its top officials relocated to India. In August 1942, under instructions from London and due to a lack of suitable accommodations elsewhere, a government-in-exile for Burma was established at Simla, a hill station in northern India.

Destruction of Currency

The Japanese invasion of British Burma during World War II brought about significant turmoil, one of the most notable aspects being the deliberate destruction of British Burma banknotes. This action was primarily aimed at preventing the occupying Japanese forces from utilizing the existing currency for their operations.

In the wake of Japan's entry into World War II, Arthur Potter, the financial controller in Burma, issued urgent directives to district officers across the country. Their mission: prepare for the destruction of currency in the event of imminent Japanese occupation. Detailed instructions emphasized the reduction of currency stocks in district treasuries to minimal levels. If evacuation proved impossible, remaining funds were to be destroyed—notes burned or jettisoned, coins buried or discarded.

Thus, the systematic destruction of banknotes was carried out through various methods, including burning, shredding, and burial to ensure that they could not be recovered or used. The rationale behind this deliberate destruction was multifaceted. It was a strategic move to deny the Japanese access to financial resources that could bolster their military and administrative control over the region. By eliminating the currency in circulation, the British aimed to create logistical difficulties for the Japanese forces, thereby weakening their economic foothold.

The economic consequences of this destruction were profound. The sudden removal of a significant portion of the currency from circulation led to acute liquidity shortages, exacerbating the economic instability already induced by the war. This scarcity of legal tender crippled local trade and commerce, as businesses and individuals struggled to find alternative means of transaction. While the destruction of British Burma banknotes during WWII served strategic purposes, it also precipitated significant economic hardships, the effects of which were felt long after the war concluded.

India's Treatment of Burma Banknotes

During World War II, the Government of India faced significant challenges in managing the currency system in British Burma, particularly concerning the stability and usability of British Burma banknotes. The war-induced economic instability prompted the Indian government to implement several measures to address the ensuing currency crisis.

In early 1942, the influx of Burma notes into India, carried by refugees fleeing Japanese occupation, posed a significant challenge. Initially, there was no policy to manage this flow, but as the refugee crisis eased by May 1942, the Government of India aimed to prohibit the importation of Burma notes, allowing exceptions only for frontier authorities.

An agreement was reached on 4 June 1942, due to Burma's dire financial state, the Government of India agreed to assume liability for further payment of Burma notes. Consequently, the Burma Notes Ordinance of 1942 was issued on 6 June, empowering the Government of India to regulate and, if necessary, prohibit the payment of these notes by the Reserve Bank of India. The ordinance primarily addressed notes of 5 rupees and higher denominations, as the Government of India issued the 1-rupee notes and coins, which remained legal tender in both India and Burma.

On 15 July 1942, there was a press release advising that only genuine refugees with proof of ownership could cash Burma notes, aiming to prevent smuggling by enemy agents. Later, in August 1942, the import of Burma notes was banned, except for verified refugees arriving via land routes from Burma and also air passengers from China. By 31 August, no Burma notes could be cashed in India without verification from a high-ranking police officer or district official.

Despite the above, Burma notes were still accepted for government dues, including payment for salt and opium in frontier areas. Soldiers returning from Burma could exchange up to Rs 30 of Burma notes for Indian notes, but otherwise, Burma notes were not accepted in exchange for Indian currency.

Counterfeiting by Japanese

During World War II, the Japanese employed various strategies to destabilize enemy economies, one of which was the production and distribution of counterfeit currency. British Burma banknotes and British India banknotes were among the targets of such operations. The Japanese aimed to flood the region with fake notes to undermine the financial stability and trust in the local currency, complicating the economic situation for the British colonial administration and contributing to the chaos of war.

The counterfeiting operations were sophisticated using advanced printing techniques and high-quality paper to produce counterfeit British Burma and also British India banknotes. These counterfeit notes were then circulated among the local population and used in transactions, which severely disrupted the local economy. The forgery notes were often indistinguishable from the genuine ones, which made it difficult for ordinary citizens and merchants to detect them.

The British authorities, aware of the counterfeiting threat, took measures to mitigate its impact. To combat the surge of counterfeit notes, the British and Indian authorities implemented several measures, including increased surveillance of financial activities and also the introduction of new banknote designs. The 5 Rupees and 10 Rupees banknotes were completely new in design and color. The new type has the portrait of King George VI facing front instead of facing left. For British India King George VI 100 Rupees banknotes, only the watermark was changed from King George VI in profile to a frontal portrait. As a side note, the British and Allied forces also engaged in counterfeiting Japanese banknotes used in Burma to undermine the Japanese-controlled economy.

Conclusion

World War II brought immense upheaval to British Burma, profoundly impacting its currency and monetary systems. The 1940 Currency Act, aimed at legalizing Indian one-rupee notes in Burma, marked a critical legislative shift. The Japanese invasion disrupted the planned monetary reforms, leading to the deliberate destruction of British Burma banknotes to deny resources to the enemy. This, coupled with Japan's sophisticated counterfeiting operations, further destabilized the region's economy. Despite measures taken by British authorities to manage and mitigate these disruptions, the economic consequences were severe, leaving a lasting imprint on Burma's financial landscape. In the next article, we will explore the Burma banknotes issued by the Japanese government during their occupation.

Frequently Asked Questions

Q: What was the purpose of the Currency Act, 1940, in British Burma?

A: The Currency Act, 1940 (Burma Act No. XVI of 1940) was enacted to address a coin shortage caused by World War II. It legalized the Government of India one-rupee banknote (specifically the King George V 1935 issue) as legal tender throughout British Burma, supplementing the limited supply of silver rupee coins.

Q: What types of paper money were legal tender in British Burma in early 1942 before the Japanese invasion?

A: In early 1942, British Burma recognized five types of paper money as legal tender, all liabilities of the Reserve Bank of India. These included three types of British India banknotes (pre-1938 Government of India notes, RBI King George VI notes, and GOI King George V and King George VI 1 Rupee notes) and two types of British Burma banknotes (overprinted King George V notes and RBI Burma notes).

Q: Why did the British authorities destroy British Burma banknotes during the Japanese invasion?

A: The deliberate destruction of British Burma banknotes during the Japanese invasion was a strategic measure to prevent the occupying Japanese forces from accessing and utilizing the existing currency. This action aimed to deny them financial resources, thereby creating logistical difficulties and weakening their economic control over the region.

Q: How did the Government of India manage Burma notes carried by refugees into India during WWII?

A: Initially, there was no specific policy. However, by May 1942, the Government of India aimed to prohibit the import of Burma notes, allowing exceptions for verified refugees. An ordinance in June 1942 made the Government of India liable for Burma notes (5 rupees and higher), but their exchange in India was restricted and required stringent verification.

Q: How did the Japanese attempt to destabilize British Burma's economy during WWII?

A: The Japanese attempted to destabilize British Burma's economy by producing and distributing sophisticated counterfeit British Burma and British India banknotes. Their goal was to flood the region with fake currency, undermining financial stability and trust in the local monetary system, thereby complicating the economic situation for the British administration.