Commerce in Bhutan was traditionally carried out through a system of barter in rice, butter, cheese, meat, wool, hand-woven cloth and other local produce. Bhutan first began to produce coins in silver towards the end of the 18th century, mainly for use in trade with the plains. These were followed by coins struck in alloyed silver, copper or brass, which were used for minor local purchases. These pieces, known as "Ma-trum" or "Chhe-trum" were struck by several local chieftains, rather than by the central government. Coin production continued into the 20th century under the reign of the first King, Druk Gyalpo Ugyen Wangchuck (1907-26), who gradually improved the quality of striking. In 1928/29, during the reign of the second King, Druk Gyalpo Jigme Wangchuck (1926-52), fine machine struck silver and copper coins were introduced into circulation, marking the beginning of modern coinage in Bhutan. However, throughout this period the use of coins remained limited, and barter remained the predominant means of carrying out transactions, and even government officials were paid in kind, rather than in cash. In the mid 1950's, during the reign of the third King, Druk Gyalpo Jigme Dorji Wangchuck (1952-72), the economy gradually started to become more widely monetised, with further issues of "silver" coins, using the dies of his father, but of a nickel alloy. In 1968, the Bank of Bhutan was established as a further step towards full monetisation. By this time most salaries were paid in cash, rather than in kind.
Monetary reform commenced in 1974, during the reign of the 4th King, Druk Gyalpo Jigme Singye Wangchuck, with the issue by the Ministry of Finance of the first bank notes in 1974 coinciding with His Majesty's Coronation. The unit of currency was accordingly standardised with 100 Chhetrum being equal to 1 Ngultrum. In 1982 the Royal Monetary Authority of Bhutan (RMA) was established to act as the central bank of Bhutan. The RMA commenced its operations in 1983, when it assumed liability for all notes and coins previously issued by the Ministry of Finance. Denomination of Banknotes and Coins in Bhutan. At present, notes in Bhutan are issued in the denominations of Nu.1,Nu.5, Nu.10, Nu.20, Nu.50, Nu.100, Nu.500 and Nu.1000. The printing of notes in the denominations of Nu.2 has been discontinued, and the Nu.1 denomination has been coinised. However, such notes issued earlier which are still in circulation are still considered legal tender.
Coins are available in denominations of Ch.5, Ch10, Ch.25, Ch.50 and Nu.1.
The various denominations of banknotes and coins are decided by the RMA's Board of Directors on the advice of the RMA. The designs and security features of the banknotes and coins are also proposed by the RMA and subject to approval by the Board of Directors. The RMA estimates the quantities of notes and coins of different denominations that are likely to be needed, and after obtaining the approval of the Board, invites tenders from renowned international security printing companies and mints. The notes and coins received from the printers are stored in the vaults and issued to the banks and the public on request. Notes and coins returned from circulation by the banks and the public are examined and only notes and coins which are fit for circulation are reissued. "Soiled and mutilated" notes are destroyed by shredding so as to maintain the quality of the notes in circulation.
Soiled notes are those which have become dirty and limp due to use, and mutilated notes are those which are torn, disfigured, burnt etc. Such notes can be exchanged at the RMA. Full value is payable against soiled notes. Payment of value against mutilated notes is made in accordance with the Note Refund Rules which have been framed by the Board of Directors under Section 21 (9) of the RMA Act.General features of bank notes. The first series of banknotes issued by the Ministry of Finance and the Bank of Bhutan were all of the same size, irrespective of the denomination. However, this sometimes made it difficult for the largely rural population to differentiate between the denominations.
The first series of banknotes issued by the Ministry of Finance and the Bank of Bhutan were all of the same size, irrespective of the denomination. However, this sometimes made it difficult for the largely rural population to differentiate between the denominations and the new series 2006 with different size, color and the design of the notes were initiated by the Royal Monetary Authority of Bhutan.
The new Ngultrum banknotes of 2013 series in denominations 50, 20, 10 and 1 were issued to the general public in early 2013. Low denomination banknotes are subject to soiling and wear and tear during circulation and processing, and consequently pose a major challenge to RMA. Since, the hybrid substrate combines the public acceptance, intrinsic security features, and cost benefits of paper banknotes with the anti-soiling advantages of polymer banknote, denominations of 10 and 1 were printed on hybrid substrate, a composite of core cotton banknote laminated with 2 thin transparent polymer sheet for enhanced durability and anti-soiling property in the year 2013.