As mentioned earlier today, I've found a 1863 book on Indian banking and have started reading it (The rise, progress, and present condition of banking in India, Charles Northcote Cooke, P.M. Cranenburgh, Bengal Print. Co., 1863.)
I'm presenting extracts from its preface and second chapter (on the antiquity of banking in India), below, along with annotations in colour. Charles Northcote Cooke was a senior banker, being Deputy Secretary and Treasurer to the Bank of Bengal.
Clearly India had a form of capitalism before the British came. And this form merged seamlessly into the new forms that were introduced in India by the British. Cooke struggles, though, with the idea that banking could have originated in India without assistance. He thinks the Greeks or Jews might have helped!
THE RISE, PROGRESS, AND PRESENT CONDITION OF BANKING IN INDIA, BY CHARLES NORTHCOTE COOKE, ESQ., DEPUTY SECRETARY AND TREASURER, BANK OF BENGAL, 1863.PREFACEIN submitting this work to the Banking and Commercial Community of India, I desire to claim for it no other merit than that of being the first of its kind in this Country. I could have wished to have made it more complete than it is, but the refusal, in some quarters, to give me the most trifling information, has foiled my best endeavors. Though too late to be remedied, I shall still be happy to receive any suggestions, as they may be useful in the event of the work ever reaching to a second edition. I am sensible of its manifold imperfections : but, with this acknowledgment, and, with the assurance that it has been put forth simply to supply a want, I trust to disarm severe criticism. Some useful hints have been afforded me about Ceylon, by a well-penned and unpretending little brochure by Mr. H. D. Andree, Accountant of the Chartered Mercantile Bank at Colombo, to whom I am under obligations for his courtesy in forwarding it to me. In writing the history of some of the Banks, I have availed myself freely of the information to be found in the Banker's Magazine, when my own notes have proved insufficient for the purpose.CHAS. NORTHCOTE COOKE. CALCUTTA, No. 2, Royd Street, 28th May 1863.Its antiquity in IndiaTHE knowledge of Banking in India was long anterior to the settlement of the English in this part of the globe, though the system under which it was carried on was widely different from that which European skill and science have introduced.From time immemorial, the Banker has always been an important member of Indian society. Formerly, in all divisions and sub-divisions of that society, he had his type and representative, discharging functions of indispensable necessity to the well-being of the community. The Empire had its Banker, the Soubah had its Banker, the Zillah had its Banker, and the Village had its Banker.Each in his sphere exercised an engrossing influence; each, in addition to his financial, was charged with a large proportion of social and political responsibilities. The traditions of the Hindoo, and the records of the Mahomedan periods of our history, endow the higher classes of Bankers with the character and powers of Ministers of State. No royal or imperial Council was complete in its members without the Banker.The principal source of the revenue was the land tax, which, according to practice, was paid in kind. The royal or imperial exchequer could not well accommodate the rather bulky forms in which the revenue was collected from the people, and the magnitude of the royal or imperial transactions, as well as the peculiar character of some of them, necessitated the employment of metallic and paper currencies.Standing armies had early become a part of Indian institutions, and mercenaries seldom stipulate for remuneration with necessaries, or with luxuries, in kind. A pervading and a properly organized agency was therefore constantly necessary to convert the proceeds of the taxes into a useful form, and to make the public resources readily available to the demands of the State. Hence the institutional character and political influence of Indian Banking.The general state of society also precluded the independent accumulation of capital in many hands, and the ruler and the provincial governors were often personally the least trustworthy men in the country. None therefore but the possessors of political influence ventured to deal with them.Last of all, caste came to the aid of these causes, and consolidated the system into an institution. The son of the Banker could only be a Banker, and he whose father transacted the emperor's or the soubadar's monetary business had, according to the first Indian notion of rights, an indefeasible title to succeed to that business.The action of British laws, and forms of civil government, have, in some measure, destroyed the universality of the institution and the nature of its form, but it nevertheless retains its vitality, though under much alteration. The Banking Corporations and Government Agencies at the Presidencies, that have succeeded the hereditary establishments of the Dosses and Setts of imperial times, are devoid of the political influence which the latter exercised.The functions of the Zillah Banker have been divided between, and appropriated by, the revenue collector and the independent capitalist.The Village Banker, like most other of our village dignitaries, still maintains his character and position, and may be promptly recognized in the Village Mahajun. The diffusion of capital, and the conversion of taxes in kind into money-taxes, have closed up some and opened other channels of Banking business, and at present, though an extensive system of Banking is carried on, it bears a less peculiar character than before, and is largely mixed up with the funding and general commercial business of the country.The occupation is not gone. It has only shaken off the trammels with which tradition and conventional forms formerly bound it. The Bankers of the present day may be divided into three classes: the City Shroffs, the Zillah Bankers, and the Village Mahajuns.City Shroffs: The first are chiefly engaged in exchange operations, in dealing with the public stock, and making advances on securities to commercial establishments. They possess extensive credit throughout the country, and comprise some of the most honored names in Indian society.Zillah Bankers: The second are the depositaries of the monied wealth of the landed families or their creditors, and have a close connection with the internal trade of the country, in which they are often found engaged directly on their own account.Village Mahajuns: The character and functions of the third are well known. In the North-Western Provinces, the Village Mahajuns are, owing to the impoverished condition of the agricultural classes, and to the severity of the operation of the revenue laws upon them, a thriving, in fact the only thriving class. In Bengal, every man, with a little spare cash, is a Village Mahajun.Of these several classes, the one, which is most directly useful to the community; is the class of Zillah Bankers. Their close connection with the landed interest, and the assistance they afford towards the exportation of the superfluous produce of the interior districts of the country, give a peculiar value to their services. They form efficient props to the fortunes of the landed families which connect themselves with them, and have frequently rendered important aid to the Government. Of this Lalla Joteepersaud is as instance. During the mutiny in 1857-58 he came forward most liberally and nobly to assist the authorities.The urgency of the periodical calls for the public revenue from landed proprietors, and the serious consequences of default in the payment of the assessment, render the assistance of the Bankers of the last importance. Their agents also are to be found in most produce marts, making advances to dealers, and their operations extend in some cases, we believe, to the bonding of produce. By all these means, they afford much assistance to the agricultural interests of the country. The vast improvement that has taken place in Scottish agriculture, owing to the peculiar system of Banking prevailing north of the Tweed, makes us almost wish that a class of large farmers may replace the yeomanry of this country, and that a similar correspondence may grow up between them and the Zillah Bankers.
EXTREME INTEGRITY OF THE SYSTEMThe character and extent of Indian Banking have been frequently cited in refutation of the unjust calumnies with which the opponents of Indian political reform have aspersed this nation. There can be no surer proof of the soundness of a people's moral condition, and of their habitual regard to truth in the transactions of life, than the prevalence of so much credit as is necessary to the existence of such a system of Banking. The native Bankers themselves are patterns of commercial morality. The dishonoring of a hoondee is an event of rare occurrence with them. They transact business with each other, and with their constituents, with a total disregard of those forms which English commercial men deem essentially requisite, and, without the aid of which, indeed, an English house of business would scarcely be secure.One peculiar feature of native Banks has always struck us as peculiarly gratifying. The business is usually carried on by gomashtas, or clerks holding a confidential position in the firm. They are often poor men, and yet are never called upon to furnish security. Their remuneration is not high, and they have often the entire disposal of the capital of a Cootee; yet it rarely happens that a firm loses anything by their dishonesty.ORIGIN OF BANKING: HYPOTHESES
The fact that Europeans are not the originators of Banking in this country, need not strike us with surprise, for, both from internal evidence, which the successes of the British arms in the Punjab further extended and opened out, we know that civilization and the arts distinguished the East for a very considerable period before the West had begun to emerge from ignorance and barbarism. "When the Dorian conquerors drove a large portion of the Greeks into exile, the fugitives acquired new settlements in Asia (Minor), and established their own national Bank."Of all the nations of antiquity, none were more persevering in the work of colonization than the Greeks. At a very early date they traded with, and colonized, the shores of the Black Sea, and from thence carried their commodities, probably by way of Persia and the Caspian Sea; far into Asia. The progress also of Alexander the Great, through the Punjab, may have contributed to extend the knowledge which the Greeks possessed, and it is not improbable that, long before England had ranked in the scale of nations, India had adopted a system of Banking which may have originated that now in use with the Shroffs or native Bankers.In looking at Asia in this light, we are justified in assuming something from her former position. Asia surpasses all other divisions of the Globe in the antiquity of its population. Here were transacted events of the utmost importance. Here the human race first made their appearance: it was the theatre of their earliest achievements : the grand centre from which population, science, and all the arts of civilized life, have gradually diffused themselves over the other regions of the world.Another means by which Banking might have been introduced into India was through the Jews, many of whom settled in Asia, on the dispersion of the tribes, after the destruction of Jerusalem, A. D. 70. This proscribed people, who are celebrated for their acuteness in monetary dealings, may have contributed, in some measure, to the dissemination of Banking as observed by the aborigines of this country.Whoever is conversant with Scripture history, and has given his attention to the customs of this country, cannot fail to notice a very close resemblance between the practices of the Jews and the natives of India. But although the Shroffs have, for ages past, been considered the Bankers of the country, there has not always been a general recourse to them; for, whether under apprehension of the exactions of the zemindars, or from some other cause, which we may advert to elsewhere, a very large class of people resorted to the practice, common throughout all Asia, of hoarding up their money, or melting down the gold and silver into ornaments for themselves, their wives and children, and thereby allowing it to lie unproductive.Great astonishment has been expressed, both in England and India, at the constant and continued drain of silver from Europe, without any satisfactory explanation or elucidation of its disappearance; but this wholesale hoarding will afford some clue to the withdrawal from circulation of such vast sums. Still, the profits of the Shroffs, or Indian Bankers, were considerable, and some thirty years back they constituted by far the richest class of the people of Bengal and Hindoostan, and the countries appertaining to the Presidencies of Madras and Bombay. The most wealthy are to be found settled in Calcutta, Dacca, Patna, Benares, Mirzapore, and Bombay, but the class are to be found located over India, wherever business exists.
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