Chapter III — Central Banking Functions
Section 31: Issue of demand bills and notes
Reviewed by CA Nikhil Gupta · Last reviewed 18 September 2026
Section 31 restricts issue of bills of exchange or promissory notes payable to bearer on demand and reserves specified note-issue functions to authorised public institutions subject to statutory exceptions.
Operative provisionOfficial sources mappedProvision-specific decode
Finin2min - Section 31 in 2 minutes
Statutory structure and clause / subsection decode
This map separates the operative limbs of this provision so thresholds, powers, conditions and exceptions are not collapsed into a single summary.
Scope
Section 31 restricts issue of bills of exchange or promissory notes payable to bearer on demand and reserves specified note-issue functions to authorised public institutions subject to statutory exceptions.
Operative limb
The provision protects the currency/note-issue perimeter by preventing private instruments from functioning as unauthorised bearer-on-demand money.
Legal boundary
Instrument classification is critical: a cheque, ordinary promissory note, bearer-on-demand instrument and bank note can have different legal treatment.
Worked practical example
Facts. A company cannot evade Section 31 by calling a bearer-on-demand paper instrument a 'voucher' if its legal terms amount to the prohibited form.
Compliance points and common mistakes
- Do not decide the issue from the heading alone. Map the facts to the operative words of Section 31 and to each relevant subsection, clause, proviso or explanation shown above.
- Keep the statutory question separate from the operational overlay. Instrument classification is critical: a cheque, ordinary promissory note, bearer-on-demand instrument and bank note can have different legal treatment.
- Do not convert an exception, exemption or discretionary RBI/Government power into an automatic entitlement. Record the authority, conditions and effective date.
- Where the provision is historical, omitted or repealed, state that status prominently and do not present it as a current compliance obligation.
Connected provisions and instruments
Section 31 has no universal instrument dependency in this package. Add an RBI circular or direction only when its subject, entity and effective date cover the issue being analysed.
Questions and answers
What is the purpose of Section 31?
Issue of demand bills and notes: Section 31 restricts issue of bills of exchange or promissory notes payable to bearer on demand and reserves specified note-issue functions to authorised public institutions subject to statutory exceptions.
Which statutory limb should be checked first?
Scope - Section 31 restricts issue of bills of exchange or promissory notes payable to bearer on demand and reserves specified note-issue functions to authorised public institutions subject to statutory exceptions.
What is the next legal boundary?
Operative limb - The provision protects the currency/note-issue perimeter by preventing private instruments from functioning as unauthorised bearer-on-demand money.
What record should support the conclusion?
Section 31 file evidence: For fintech or tokenised-instrument analysis, examine the legal promise, bearer feature and payment-on-demand character rather than the product label alone.
Primary sources
- Department of Financial Services - consolidated RBI Act (states amendments through Finance Act, 2022)
- India Code - Reserve Bank of India Act, 1934
Source control for Section 31: use the official consolidated RBI Act for the statutory text and footnotes, then separately reconcile any post-Finance Act 2022 amendment, commencement notification or RBI instrument relevant to the event date.