$20 banknote issued by the Mauritius Commercial Bank

The expansion of the British Empire in the nineteenth century introduced new areas of trade and commerce. When Britain took control of the island of Mauritius from the French in 1810 it was the Spanish dollar that was the island's metallic standard, and whilst there was a colonial dollar in circulation this was worth significantly less than its Spanish counterpart.

After an initial shipping of shilling coins, an expensive and time consuming practice, it was hoped that much of the banking could be left to private enterprise and not require the issuing of money by colonial government. The Bank of Mauritius was created in 1832 and the Mauritius Commercial Bank formed six years later as an alternative source of credit for the island. The issuing of paper money by both banks was a difficult process from the outset. A lack of confidence in banknotes, brought about by failing French colonial issues of the early nineteenth century, meant there was little appetite or trust in anything other than coin-based currency.

This system was thrown into further disarray following a reduction of the price of sugar, the island’s major export, and a banking crisis in Britain in 1847. The panic which had gripped financial institutions in London meant that the island’s banks struggled to secure capital leading the Bank of Mauritius to fail in 1848. Whilst the Mauritius Commercial Bank survived, the subsequent inflation meant that its notes circulated at a reduction of their face value.

The use of the British currency system continued to be problematic for Mauritius because other Indian Ocean economies were based on a silver standard. The pound was at this time based upon the gold standard and fluctuations in the relative price of these metals affected exchange rates.

In 1876 Mauritius began issuing its own currency based on a silver standard, the Mauritius rupee, modelled on the Indian rupee.