Book Review: A Swadeshi Bank from South India

While reviewing/recommending old historic books, one does not know how to help interested people find the book. This is one such book and is a gem on history of Indian banking and finance.

This book narrates the history of Indian Bank which the author calls it as a Swadeshi Bank from South India. It is written by RK Seshadri, former deputy Governor of RBI. The author does a great job of fitting the evolution of the bank against both domestic and global backdrop.

The book starts with a background on banking in India and some details on Madras economy and population. There was hardly any formal banking then and much of money business was done by business groups. In Madras area, the major business community were the Chettiars which dabbled in everything including banking. Madras was a low key town then and much of Chettiar business was in Bengal and Burma. Hence banking remained limited in Madras.

Presidency Bank of Madras came up in 1843 but was limited in scope. Then there were branches of banks registered outside like Agra and United Service Bank, Oriental Bank Corp etc. But most of these banks failed. Then there were some agency houses as well which dabbled in money business but failed as well. Infact, failure of one such company called Arbuthnot and Co. which led to formation of Indian Bank in 1907.

Indian Bank was promoted by leading personalities of Madras most being lawyers. The author has this nice explanation that in the initial years, law was the most prominent occupation. Also, banks needed lawyers to navigate through maze of laws which applied in the British colony of India.

The story then weaves through various events like WW-I. WW-II, Great Depression, Independence, Bank Nationalisation and so on. The author being a central banker brings rich insights on interest rates, exchange rates, inflation, economic conditions etc. There is useful discussion on how govt bonds traded during that time. There is also a chapter on perils of living on easy money as interest rates were really low in 1950s which is surprising given the low capital base of the country. If a business historian had written the book may be he/she would have skipped the market and baking discussion and focused more on business development.

Overall, a terrific book. People interested to know more about Indian banking should read this short book. Actually, it has lessons for today as well. We are now moving to the so called differentiated banking regime where there will be different kinds of banks for different needs. Well, this is how things used to be in the past as well. We had plenty of small and regional banks but only few could survive (the same story applies for stock exchanges too). Those that actually survived were mostly govt./princely state formed banks.

So, there is nothing really new about the recent initiatives. Just that this time around these players shall be private ones which could actually make their job tougher. History and even current affairs of banking show the closeness the sector has with govt./state. This was the case in the past and remains so today as well..

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