Well, there was a bank named ‘Sarkari Dukan’ (Government shop in English) in State of Udaipur!

I was reading this book by Dr Harish Sharma (delighted to see a link on the net) which was actually his PhD thesis The thesis looks at evolution of banking focusing on Rajasthan State. It has many interesting aspects of Indian banking, which we sadly neither know nothing about nor we care.

He starts the book by quoting from this interesting text by William Robertson.

it is a cruel mortification, in searching for what is instructive in the history of past times, to find that the exploits of conquerors who have desolated the earth, and the freaks of tyrants who have rendered nations unhappy, are recorded with minute and often disgusting accuracy, while the discovery of useful arts and the progress of the most beneficial branches of commerce, are passed over in silence, and suffered to sink into oblivion.

He says this applies so well to India’s origins and progress of banking. Well not just banking but all aspects of business and commerce. We just have let everything sink into oblivion. He is talking about a much earlier period on which resources are  really difficult to figure. We have let history slip of periods on which there is atleast some “written information”.

There are some attempts to undo this damage by the Penguin series. But unless all this is taught and debated in colleges, we can hardly make much progress.

Coming back to the book. It has amazing insights into progress of banking in state of Rajasthan. It was obviously many kingdoms back then and how they financed their operations and soon. The region was also home to Marwaris and Jains who obviously had a knack for maths which was used brilliantly in financing and industry later on. We know about Marwaris not as much about Jains.

He mentions how after 1857 revolt, the state of frequent wars in the region declined. This was a time for making some economic progress and the local some of the local kingdoms did realise this. Finance was seen as a major impediment in this progress as there was uneven development in the region. This led ruling princes to establish banks/financial institutions to aid agriculture and foster industry. Of course, none had any experience in banking which showed in eventual outcomes as very few could survive.

State of Udaipur was the first to establish a bank in the region in 1842, before the 1857 revolt. It set up a bank called Udaipur state bank which was more popularly called as ‘Sarkari Dukan’ (means Government shop in English)!

As per Hindu strictures, a king could not charge interest rate. Thus this dukaan was set independently from treasury (and we thought central bank independence is a modern idea). It was set under aegis of the two prominent merchants in the region.

The bank had a paid up capital of Rs 9001. Do notice the additional Rs 1 as in Hinduism we consider it auspicious.

The rulers had no idea on banking, so there were no formal rules on deposits and loans. Loans were given to the elites and hardly any industry was financed. Whatever little economic activity was financed, interest rates were high. The profits from these oppressive loans were passed on to the State(read seignorage). This is like best of both worlds. As one would expect, the bank was wound up as State of Rajasthan was formed in 1950.

Given the brief case, the name  ‘Sarkari Dukan’ is so apt. How banking kind of institutions have been formed and abused by Kings and these days by modern governments.

There were other State banks as well like Dholpur State Bank, Ramachandra Lakshman Bank in Dungarpur, Sri Krishna Bank in Bharatpur, Bikaner State Savings Bank (different from Bank of Bikaner formed in 1945, which was merged with State Bank of Jaipur to become State Bank of Bikaner and Jaipur), Jhalwar State Bank, Shahpura State Bank, Bundi State Bank and so on.

All these names add to the literature on Princely State Banks. Really sad on how we have let all this just disappear. There could have been amazing stories and on relations between State and banking.

Thanks a lot to Dr Sharma for working on such a tricky topic and releasing the book for future researchers like us. His thesis was submitted to University of Rajasthan in Jaipur. It shows how all these places encouraged such research. Even all this seems to have been lost…

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