A great increase in the issue of banknotes was experienced in Peru during 1870 - 1880. It was due to a lack of coins, which had been brought about by the reduction in minting by the Mint. (This was caused by the installation of new equipment.) and also by the movement abroad of the greater part of the coins that were in circulation, as a consequence of the passing of a law, dated 16 January 1871, that permitted the payment for imported mercahndise with bullion or silver coins.

Several years before three banks of issue had been founded: Banco la Providencia (1862), Banco del Peru (1863) and Banco de Londres, Mexico y Sud America (1863), which had issued in limited quantities notes of different denominations (payable to bearer and at sight), which circulated along with silver coins; but the scarcity of coins, made necessary the formation of other issuing banks in the capital as well as in several departments; which were officially autorized to issue notes redeemable by a certain date; the only restriction was that the bank keep a cash reserve of 35% of the quantity of notes issued. In a short time ten new banks of issue were added to those already in existence and although they had an ephemeral existence, they made full use of their powers and put into circulation a large variety of notes.

During this same period some commercial firms also issued private notes in small denominations, which only circulated within the limits of their respective businesses.

The considerable increase in banknotes that subsequently occurred, was caused in part by the large loans that the banks gave to the government, which brought about the depreciation of the notes and before long it was impossible to comply with the obligation to exchange them for silver coins. The crisis was increased even more, when the Compania de Obras Publias y Formento de Peru (Company for Public Works and Development of Peru) was authorized to issue notes, because it issued them to finance the construction of railroads.

Later the government prohibited the banks to continue to issue notes and assume the responsibility for the notes in circulation, ordering that they be converted to fiscal notes; an act that gave rise to the formation of the Junta Adminisaradora y de Vigilancia de la Emision Fiscal, with ample powers to control these issues and also to determine the exchange rate of the paper money that members of the Junta would sign and for notes that had been ordered to be printed by the American Bank Note Company of New York.

Meanwhile it proceeded to stamp the bank issues with an oval stamp in black ink on which appeared the legend EMISION PAGADERA POR EL GOBIERNO (issue payable by the government) and that of the Company of Public Works with another that said EMISION AUTORIZADO POR EL GOBIERNO (issue authorized by the government)>

As a consequence of the establishment of the new regime of paper money, the banks had no alternative than to close their doors and declare liquidation.

The fiscal notes that replaced those issued by the banks and the Company of Public Works were exchanged at par and put into circulation in the denominations of: 1,2,5,10,50,100 and 500 soles. Subsequently, successive issues of these notes were produced in order to finance the war expenses demanded by the War of the Pacific, for which reason they became totally discredited.

Almost at the end of the year 1880 other fiscal notes were issued. They created a new monetary unit, INCA, these issues were received with some resistance by the public. The notes were made in the denominations of 1,5, and 100 Incas and for fractional denominations unused notes made by the American Bank Note Co of New York for the Board of the Banco de La Cia General del Peru, were overprinted with the values of: un real de inca, 5 realies de inca and 100 centavos de inca (these notes were dealt wtih in an article that appeared in Numismatic no.13).