INDIAN FINANCE AND BANKING BY G. FINDLAY SHIRRAS DIKKCTOR UK STATISTICS I1H THE jOVERNMKNT OF INDIA 1 M.. LOW 01-TH1-, UNIVKKhllY OF CAtCOTTAJ ON SPECIAL DUTY IN THE I 1NANCF DEPARTMENT OK THE GOVERNMENT OF INDIA, jyio-iyij KKAnFH IN INDIAN MNANCK AND CURRKNCY IN THE INIVKKsriY OF CALCUTTA, 1914 MACMILLAN AND CO., LIMITED ST. MARTINS STREET, LONDON 1920 COPYRIGHT First Edition 1919 Reprinted 1920 TO THE UNIVEKSITY OF CALCUTTA AND SIR ASUTOSH MOOKEKJEE VICE-CHANCELLOR, 1906-1914 PREFACE TO SECOND IMPRESSION As a second impression of this book has been called for, I have taken the opportunity to add as an Appendix a summary of the conclusions of the Committee on Indian Exchange and Currency published on February 2, 1920, together with the orders of the Secretary of State in Council on the Report. G. FINDLAY SHIRRAS. CAIILTON HOTEL, PALL MALL, LONDON, S. W., February 20, 1920. PREFACE I ALONE am responsible for the contents of this book. It has no official character whatsoever, and has not been examined by the financial authorities of the country. G. FINDLAY SHIRRAS. CALCUTTA, July 24, 1919. CONTENTS CHAPTER I INTRODUCTORY I. THE SUBJECT MATTER OF INDIAN FINANCE . . 1 II. THE BALANCE OF TRADE ..... 4 III. THE ABSORPTION OF GOLD AND SILVER AND CURRENCY ....... 7 CHAPTER II THE INDIAN CURRENCY SYSTEM BEFORE THE WAR I. THE CURRENCY IN CIRCULATION AND IN RESERVES 19 II. THE BALANCES OF GOVERNMENT IN AND OUTSIDE INDIA ........ 28 1 IN INDIA 29 2 OUTSIDE INDIA . . . . .31 III. RUPEE COINAGE BEFORE THE WAR ... 37 IV. AN INCREASE AND DECREASE IN THE CIRCULATING MEDIUM ........ 40 CHAPTER III THE INDIAN CURRENCY SYSTEM IN WAR TIME I. THE Two WAR PERIODS ..... 45 II. PERIOD I 1914 TO 1915 46 III. PERIOD II. 1915 TO 1919 50 1 THE CAUSES OF THE RISE IN EXCHANGE . 60 2 THE FIXING OF EXCHANGE ... 65 x INDIAN FINANCE AND BANKING IAOR 3 TEMPORARY INCONVERTIBILITY OF THE NOTE ISSUE THE ALTERNATIVE TO STABILITY . 72 4 ECONOMY IN THE USE OF GOLD . . 79 5 THE GROWTH OF THE PAPER CURRENCY . 81 6 COUNCIL DRAFTS . . . . .86 IV. SUMMARY 1914 TO 1919 90 CHAPTER IV INDIAN CURRENCY IN THE NINETEENTH CENTURY I. THE FOUR CURRENCY PERIODS x . . . .93 II. THE FIRST PERIOD TO 1835 .... 94 III. THE SECOND PERIOD 1835-1874 . . .101 IV. THE THIRD PERIOD 1 874-1893 V . . .113 CHAPTER V INDIAN CURRENCY IN THE NINETEENTH CENTURY contd. V. THE FOURTH PERIOD 1893-1900 , . . 140 1 THE GOLD STANDARD . . . .140 2 THE STIMULUS OF A FALLING EXCHANGE. 149 3 THE RISE IN RUPEE EXCHANGE . .153 4 THE FOWLER COMMITTEE . . ,168 CHAPTER VI INDIAN CURRENCY 1900-1919 I. THE OUTSTANDING NAMES OF THE PERIOD . .190 II. CURRENCY POLICY, 1900-1907 .... 193 III. THE EXCHANGE CRISIS, 1907-1908 . . . 205 IV. CURRENCY POLICY, 1909-1913 . . . . 209 CHAPTER VII INDIAN CURRENCY 1900-1919 contd. V. THE CHAMBERLAIN COMMISSION, 1913-1914. . 217 VI. THE WAR PERIOD 223 VII. SUMMARY 227 CONTENTS xi CHAPTER VIII THE PAPER CURRENCY PA o E I. THE NOTE CIRCULATION BEFORE 1862 . . . 236 II. THE GOVERNMENT PAPER CURRENCY . . . 240 III. THE PAPER CURRENCY UP TO THE OUTBREAK OP WAR 253 if IV. THE PAPER CURRENCY IN WAR TIME . . .261 CHAPTER IX THE GOLD STANDARD RESERVE I. THE RAISON DETKR OF THE RESERVE . . .270 II. THE AMOUNT OF THE RESERVE . . . .271 III. THE COMPOSITION OF THE RESERVE . . .273 IV. THE LOCATION OF THE GOLD STANDARD RESERVE . 277 V. A STATUTORY RESERVE . . . . . .279 CHAPTER X A GOLD CURRENCY AND A GOLD MINT V I. THE USE OF GOLD IN INDIA . . . .280 II. A GOLD CURRENCY ...... 282 III. A GOLD MINT 289 CHAPTER XI COUNCIL DRAFTS . . . . . . . .298 CHAPTER XII BALANCES I. INTRODUCTION ....... 308 II. MINIMUM CASH BALANCES . . . . .318 III. CASH BALANCES AND BUDGETING . . . .319 IV. LOANS 329 xii INDIAN FINANCE AND BANKING CHAPTER XIII THE INDIAN BANKING SYSTEM PAGE I. THE BUSINESS OF BANKING . . . . .336 v II. INDIGENOUS BANKING . . . . . .340 , - III. THE PRESIDENCY, EXCHANGE, ANA INDIAN JOINT STOCK BANKS 343 4 IV. THE EARLY HISTORY OF . JOINT-STOCK BANKING . 345 V...