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7 - INDIAN BANKING

Published online by Cambridge University Press:  05 November 2012

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Summary

In passing from currency and the finance of government to the kindred topic of banking, we come to a part of the subject where statistics and other information are much less freely available to the outside critic. The published figures are not adequate to tell us much of what we require to know, and the literature of Indian banking is almost non-existent. I must run the risk, therefore, of sometimes falling into errors of fact, and hope that, if these errors provoke criticism, they will bring to light the true facts at the same time.

The money market and banking system of India comprises the following as its four main constituents:

  1. (i) The presidency banks;

  2. (ii) the European exchange banks;

  3. (iii) the Indian joint stock banks; and

  4. (iv) the Shroffs, Marwaris, and other private bankers and moneylenders.

The first two of these constitute what we may term the European money market, and the rest, under the leadership of Marwaris and Parsees, the Indian or native money market-upcountry banks such as the Allahabad Bank and the Alliance Bank of Simla, which are Indian joint stock banks under European management, occupying, perhaps, an intermediate position. The local money markets, outside the main towns in which European business men have offices and where the bulk of the foreign trade is handled, are entirely in the hands of Indians.

How close a connection exists between the two money markets —native and European—how nearly the rates ruling in one agree with those in the other, and how readily capital flows from one to the other, I am not clear.

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Publisher: Royal Economic Society
Print publication year: 1978

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