Stability has been attained already, or is about to be. So, on the whole, has economy, though some current opinion in regard to the use of gold puts it in jeopardy. The system still wants elasticity. A machinery ought to be set up, therefore, by which further funds, accumulating in the hands of Government through the increased use of notes, may be used in India to afford the needed elasticity in the seasonal supply of currency.
Let the Indian public learn that it is extravagant to use gold as a medium of exchange, foolish to lessen the utility of their reserves through suspicion of the London Money Market, and highly advantageous to their own trade and to the resources of their own money market to develop the use of notes; and their financial system may soon become wonderfully well adapted to the particular circumstances of their situation. The history of the last twelve years has been transitional. The authorities have been—wisely—building up the reserves they ought to have. This process has necessarily diverted funds from the Indian Money Market, and has naturally excited some measure of opposition. But the fruits of cautious growth may soon be reaped.
CHAPTER VII
INDIAN BANKING
1. 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.
2. The Money Market and Banking System of India comprises the following as its four main constituents:—
(i.) The Presidency Banks; (ii.) the European Exchange Banks; (iii.) the Indian Joint Stock Banks; and (iv.) the Shroffs, Marwaris, and other private bankers and money–lenders.
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,—up–country 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.