To understand this you need to understand the meaning of two terms i.e. Fiat Money and Representative Money.

Fiat Money

Fiat money is both physical money and legal tender and is backed by a nation’s government. The value of fiat money is not determined by the material with which it is made. That means the metals used to mint coins and the paper used for bills are not valuable themselves. Rather, the value of the money is determined by the government. It retains its value through government stability and that of the nation’s economy.

Representative Money

Representative money is government-produced money backed by a physical commodity such as precious metals like Gold or instruments like checks and credit cards.

Today’s all of the currencies are FIAT money. It is essentially a promise from a government or central bank that the currency is capable of being exchanged for its value in goods. Value of such kind of money is based on trust and faith – That if somebody held of note of Rs.500 then it is accepted throughout the country and one can buy goods/services of 500 rupees at any cost.

The declaration by the RBI governor increases the faith of the currency holder in the currency of the country. It also ensures to the currency holder that the note is the legal tender in the country and the recipient of the currency note does not carry any risk in holding the currency. 

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