Story of the 5 Rupees Coin
The value of the metal of previously used Rs 5 coins was more than its denomination.
The previously used Rs 5 coin was made up of Cupro-Nickel (75% copper & 25% nickle) and weighed 9 gms. (Source:)
Consider the case of December 2010:
Spot Price of Nickel: around Rs. 1070
Spot Price of Copper: around Rs. 410
That is metal worth Rs. 5.20 in a coin of Rs. 5.00
Now, this is just the spot price in the commodity market. Had you gone to buy copper and nickle at that time, the cost would have been much higher.
According to a report, Indian five-rupee coins were being smuggled into Bangladesh to be melted down for making six razor blades, which then were sold at Rs 2 a piece.
Many coins were melted to manufacture utensils and other household stuffs.
Although late but the Government realised this and replaced the old coins with the new 6 gms Ferritic Stainless Steel (FSS) coins, that are much cheaper to manufacture.
P.S: Prices of nickel and copper have decreased in the last couple of years, and melting the coins might not be a good idea now !!