Another point to consider is that the government has reintroduced the 1 rupee notes some time back. Would it do away with the coin?
It has been asked by several persons as to why was 1/- note reintroduced? Even I had that question in mind and it remained unanswered.
It was introduced during the time of Rajiv Mehrishi, who was from Rajasthan.
So I asked top numismatist of Rajasthan.
Technically speaking, both coins and 1/- note are money and are issued by Government of India. They are the assets of the Government and the government enjoys seigniorage as profit. The 1/- note is, for all practical purposes, a coin made of paper. The high cost associated with notes is that if they are used regularly, they have a very short life which is inversely proportional to their denominational value.
Other notes are promissory notes of RBI and they indicate the liability of RBI. The RBI is under obligation to replace them at face value when they get soiled.
According to that numismatist, Rajasthan has a tradition of guests in a wedding offering garland of notes to the newly married bridegroom. It amounts to giving cash to young couple to set up their new home ( although I believe that it is more in some northern states like Punjab but I may be wrong). The cost of this notes garland is normally face value of notes plus making charges. However, there is a well built ecosystem of this garlands being reused by a open buyback of such garland and reselling by businesses who supply other wedding paraphernalia. In other words, these notes have really long life since the notes are kept out of day to day transactions.
Hence a man from Rajasthan decided to reintroduce 1/- notes. They are now cornered by collectors and garland makers.
Kindly note that I can not vouch for correctness of this theory ( or hypothesis).