Banking

In traditional Hindu culture, banking
was often an extension of a merchant
family’s economic life, particularly in
times and places in which centralized
banking did not exist. In most cases
these families transacted their business
using letters of credit known as hundis,
which enabled them to conduct business over large distances without the
risk of transporting gold and silver bullion. By the early 1800s, these hundis
functioned as virtual currency in much
of India, since in some cases they were
used in twenty or thirty transactions
before eventually being returned to the
issuing family for cashing. This system
made a merchant family’s creditworthiness its most valuable asset. Once this
was lost, the family’s hundis were no
longer honored, and they were unable to
conduct business. Since the evaluation
of a family’s credit was often tied to
judgments about its character, merchant families strove to cultivate the
image of seriousness, dependability,
and thrift. In this ethos the only acceptable forum for lavish expenditures was
for religious endowments, since these
reinforced the family’s pious image and
thus enhanced their creditworthiness.
With part of their surplus capital, these
families would usually engage in
moneylending as one way to increase
their wealth; the largest families
routinely lent money to royalty, which
provided them with even greater status.
For a masterful picture of the merchant
family ethos in northern India, see
C. A. Bayly, Rulers, Townsmen, and
Bazaars, 1983.