BANKING IN MUGHAL INDIA
INTRODUCTION TO THE TRADE IN MUGHAL EMPIRE
The Mughal Empire was one of the biggest centres of attraction for trade and commerce all over the World. There were great flourishing trade centres in Lahore, Agra, Ahmadabad, Sironj, Berhampore, Dhaka, Patna, Benares, Golconda, Deccan, Bijapur, and Daulatabad. Trade routes crisscrossed the country, the vibrant trade route of Surat-Agra passed through Sironj and Burhanpur. In fact Burhanpur had trade connections with Iran, Turkey, Russia, Poland, Arabia, and Egypt.[i] A detailed map of all these places is given below for reference. Surat and Cambay were two prosperous ports in Gujarat which connected Mughal India with the markets of Asia and Europe. These urban centres of trade contributed about 19% to Mughal tax revenue.
Depending on the nature of trade we can classify these trade centres into two broad categories. Towns like Peshawar, Lahore, Sirhind, Allahabad, Patna and Qassimbazar (Kassimbazar) prospered because of their close proximity to the national highways or trade-routes. Secondly towns like Surat, Cambay, Satgaon, Chittagong, flourished because of their location near the sea. Apart from these towns there were manufacturing centres, each famous for its produce, Dhaka for textile, Patna for saltpetre, Biana and Sarkhel for indigo and so on. So in effect there was thriving trade going all over the Empire, both through land and sea.
The commodities that were taken in and out of the country are specifically interesting. As I mentioned earlier that Bengal silk was a very attractive commodity for the Dutch and English traders. Apart from these Bengal supplied, fair amount of salt for domestic need, and handicrafts of ivory to the foreign traders. From Central Asia came horses, fruits, slaves, and gorgeous carpets, lavish dresses and similar products which had huge demand in the Mughal court. The European traders brought gold bullion, choicest wine, innovative products, precious stones, glass works all the way from Europe. It is a point to remember that common Indians did not have much affinity for European products it was reserved for great connoisseurs of art, and the Mughal court was full of these sorts of people. Take Jahangir for example he was presented with ‘a small whistle of gold, weighing almost an ounce, set with spark of rubies, which he took and whistled therewith almost an hour’.[ii] We may assume that Jahangir whistled better than all the birds of Mughal India put together! Jahangir’s father Shahjahan had special love for mastiffs and deer hounds. It is interesting to learn how far these presents or royal commerce were useful, in one occasion the President of Surat factory John Child was able to change the mind of the Mughal Governor by a present of two spaniels. As the common Indians did not buy anything, and the target customers of the Europeans being the Mughal royals a great amount of finance was needed to feed the European companies, it was so much that Sir Thomas Roe pointed out, ‘Europe bleedeth to enrich Asia’. Cities in Gujarat like Ahmadabad, Surat, and Baroda were known for their textiles, silk weaving, in fact silk from Bengal was converted to dresses, apart from these there were various kinds of drugs and medicinal items that went abroad. [iii] To summarize the main imports of India to Europe were the calicoes (a plain-woven textile made from unbleached, and often not fully processed cotton) of Madras, the saltpetre of Bihar, silk and sugar of Bengal. As far as the exports of the Europeans were considered it was primarily to fan the fire of lavishness of the Royal Mughals while their subjects roamed the Great Empire with minimum clothing and few utensils.
So we have a got rough idea about the size of trade in Mughal India. Now we are concerned with the people connected with the trade going round. In between producers and the final consumers there are numerous others who facilitate the reach of goods to their destination. There are middlemen, transporters, traders, financers and we are concerned with the last group. The basic requirement of buying a product is money. Now money can be in the form of coins, or paper. The history of coins in India dates to time immemorial. However there is other form of transaction which specifically developed and got sophisticated in Mughal times which was the cashless transactions. In those times it was difficult to roam around the country with huge amount of cash, it involved high amount of risk. So the big traders generally preferred the cashless transaction and we will understand this by picking up the case of Tavernier.
BILLS OF EXCHANGE:
Jean Baptiste Tavernier (1605-1689) was a French gem merchant who widely travelled India during the reign of Shah Jahan. His priceless book titled the Travels in India records two most important subjects, a detailed description of Kohinoor and the visit to the construction site of Taj Mahal. Monsieur Tavernier travelled all the way up from Agra to Dhaka, where he met the Governor Shaista Khan. Tavernier presented Khan with a mantle of gold brocade, with a grand golden lace of “point d’Espagne” round it, and a fine scarf of gold and silver of the same “point,” an a jewel consisting of a very beautiful emerald.[iv] Next day he presented his son with a watch having an enamelled gold case, a pair of pistols inlaid with silver, and a telescope. On the following day he agreed with the Governor on the prices of goods sold. The Governor sent him to the treasurer to collect his bill of exchange payable at Qassimbazar. Tavernier says he was advised to accept the bill of exchange against cash because of the trouble of carrying cash on road. He was reminded of the dangers that lay ahead, the robbers, wild animals etc.
In fact the hundi network was widespread all throughout the Empire and it was customizable according to need. For example a trader having paid a fixed sum of money to a banker in Surat brings the hundi to Ahmedabad, he is liable to paid the entire amount. If the trader wishes to pay his creditors he can hand over the hundi to him and relinquish his obligations. The man through him all these transactions occurred were called shroffs, they engaged in all sorts of money transfers and issued letter of exchange.[v] In fact we can classify four types of hundis, and all four types were issues by shroffs, they were, darshani or payable on sight, miti or payable after date mentioned in the instrument, shah-jog payable to a respectable man, and jokhami, sort of risky hundi which covered some elements of insurance. The Jokhami hundis were drawn against goods despatched and it contained certain conditions, if the goods are lost or damaged the holder of the hundi had to bear the loss. Payment of such hundis is made on safe receipt of goods and their purchaser act as, sort of insurance agent. [vi] The list of hundis presented are not exclusive, there were other forms of hundis as well. The Dutch East India Company mentions that the commission on hundis in Surat or Ahmedabad to be 0.62 to 1.25 percent during the 1640’s. However it was not a fixed rate, in case of mayhem, political or natural disorder the hundi rates varied considerably.[vii] It must be remembered that hundis were in use even before the time of Mughals it attained further sophistication in the time of the Mughals.
Sometimes though, hundi transactions contained certain risks, for this we will bring up Tavernier again into the discussion. As stated before that Tavernier was offered a hundi payable at Qassimbazar, he on reaching the place presented the hundi to the local banker. The banker at Qassimbazar agreed to pay the sum after deducting 20,000 from it; Tavernier was disheartened to find that Shaista Khan had through a letter instructed the banker to reduce the payment by 20,000. A war of words broke out between Tavernier and Khan, finally Tavernier agreed to receive the leftover after deducting 10,000. The hundis played an important role while building the Dilwara temples at Mount Abu, it is said that the Jain brothers drew a hundi of Rs. 10 Crores on the Nagar Seth. It also played a vital role in exponentially increasing the coffers of the Manick Chand (whose successor Fateh Chand was awarded the title of Jagat Seth) when he took the sole responsibility of transferring the revenue of Bengal from Dhaka to Agra by means of hundi.[viii] It was through Manick Chand that annual revenue of Rs. 1.5 Crores was sent to the Imperial treasury at Agra. This financial ingenuity reduced the huge cost involved in physically transferring the cash from Dhaka to Agra. Previously the revenue was sent with a convoy of 200 wagons, escorted by a regiment of 600 horse and 500 foot soldiers.[ix] Manick Chand’s resourcefulness saved all these people from great drudgery.
Coming back to shroffs, moneychangers, and money lenders whatever you call them, they were very clever. Tavernier says, “All the Jews who occupy themselves with money and exchange in the Empire of the Grand Signeur pass for being sharp, but in India they would scarcely be apprentices to the Changers.” One of the most important tasks of these shroffs was to understand the value of the money. In India wherever transaction involving gold and silver coins occurred the year of minting the coin played a significant part. In Mughal India all coins struck in the name of the provincial ruler or governor were called siccas. After three years in circulation a sicca Rupee became a sonnaut and passed at 111/116th of the original denominated value, which means a coin of 100 sicca would be valued to be 95. This system was a major setback for the illiterates since they wouldn’t be able to read the dates and thus would be cheated. The European Company’s when they arrived in India needed immediate cash, which the Royal mint couldn’t supply in time. For this they had to depend of the local shroffs who made on the spot payments, but sometimes they also needed time to arrange for high volume cash. The currency conversion did not have any standardised procedure, the rates fluctuated at will, and occasionally the Company had to accept cash at lower price.
Tavernier’s above statement on the shroffs was not too harsh and that you will find yourself. As already hinted before, the shroffs could create an artificial scarcity of coins, and dictate the amount of commission at will. In 18th century Ahmedabad a sudden rise of commission by the shroffs forced the merchants to take up arms against them. In effect unlike now, the shroffs had full autonomy in deciding the exchange rates. Wherever there were multiple currencies in use, the shroffs benefitted the most. Bengal had all different currencies under its dominion, and the tax had to be paid in siccas which was the state currency. Naturally sicca being the state currency received an upper hand over all other local currencies. Talking about local currencies there were Arcot currencies minted in all different names but very popular. There were English Arcots, French Arcots, Dutch Arcots, Narayani Arcots all in circulation. Even if all these currencies had same weight, same finesse each received differential treatment. The siccas also varied from place to place, and they too received differential treatment, for example a sicca minted in Surat will be of lower value than a sicca of Murshidabad. In effect a shroff who has higher stock of Murshidabadi siccas will benefit more. So the entire money exchange process was complex, and it was designed by the shroffs for their own advantage.
Manick Chand had good rapport with the Nawab of Bengal, Murshid Kuli Khan and through him he was appointed to collect the tax of the Bengal province. Each year the zamindars of different parganas would assemble in Murshidabad, the capital of Bengal presidency and deposit their taxes to Manick Chand. The wily banker took advantage of the prevalent system and demanded payment only in siccas. Payment in siccas meant the local currency brought in by the zamindars had to be exchanged, and this is where by his control on the exchange rates Manick Chand made huge profit. The added advantage was that the local currencies would be sent for recoinage which after being issued by the mint will revert to its original value.
The Europeans, the English, the French, and the Dutch were frustrated by the monopoly of shroffs. To trade in India the use of local currency was a basic necessity for which they brought bullions from home. The price of bullion was dictated by the Jagat Seth and also the charges for making coins out of them. The English could not do much about it since the instruction of the Nawab was very much clear on this, the Seth was the sole buyer of bullion and also responsible for minting coins. Even if the English managed somehow to establish a mint in Calcutta, it proved to be of little use. The Seths obviously did not like this audacity and they devalued the currency produced from the English mint such that it lost its significance. The Jagat Seth profited so much from this unique banking system that even after a plunder of 2.5 crores by the Marathas from their treasury in Murshidabad caused them almost no trouble, it was like taking away a handful of straw from a heap. The chroniclers of Murshidabad say that the Seths could easily meet a hundi of 1.5 Crore and offer payment at sight without any the trouble to arrange the cash!
Although we discussed the fortunes of Manick Chand at length, but it is important to remember that he was not the only shroff in Bengal or in India. There were others who performed in villages, urban centres and metropolis like Calcutta for example. The village level shroffs dealt with labourers, middlemen, various vendors and there the prevailing currency was not sicca, but cowrie (literally shells). In urban centres the shroffs dealt in cowries as well as in local currencies which the merchants needed to buy merchandise or for payment of labourers.
Now that we have fairly good idea about the currency management practised in Bengal under Mughal rule, we will move on to the next level which is very important feature of a banking sector-Advances or Credit. It is difficult to group all advances made into few broad categories, however we may surely discuss a few. Agricultural loans were mainly availed by the peasants, mainly from the village money lenders with high interest rates. Sometimes the state offered the peasants interest free loans, in other times the farmers had to depend mainly on the rural credit suppliers. Interest rate of unsecured agricultural loans was pretty high as high as 40% and most of the loans to the farmers were unsecured. The repayment could be done by providing service to the money lender or even by selling the children of the debtor.
High value advances were offered in the form of commercial credits to big merchants and traders. During the mid seventeenth century the credit interest was usually up to 0.5 to 1.25 percent per month. To finance distant trade the interest rate sprang up to 40 percent, because of the higher risk involved. In fact the both the high net worth bankers and merchants enjoyed a special privilege in the Mughal court. The Surat merchant Rustam Manak had so strong rapport in the Mughal court that he was able to secure exemption for Parsees from the infamous jiziya and that too under a special sanction from Aurangzeb himself! Such courtesies and royal favours were followed religiously in Mughal court. Like today we have the Best Banker’s Award in that time as well such similar practices existed. For example after the death of Mulla Abdul Ghafur an eminent merchant in Surat, his son Mulla Abdul Hai was awarded the title of ‘umdat-ud-tujjar’ (the most eminent merchant). Similarly Fateh Chand of Bengal was awarded the title of Jagat Seth (banker to the world) by the Mughal Emperor Farukh Siyar. Coming back to the merchants in Surat, they were so rich that they often lend money to the Princes. This is how Murad (brother of Aurangzeb) borrowed 10 million Rupees from the merchants of Surat by issuing a bond guarantying repayment. Unfortunately Murad lost the war of succession against Aurangzeb. Imagine the courage of the creditors when they asked Aurangzeb to redeem the bond, the Emperor finally conceded to the claim. The creditors surprisingly took a u-turn and said they only wanted an acknowledgement of debt, and they had no wish to have a single penny, and the Emperor might treat as a gift![x] However when Aurangzeb asked for an interest free loan under heavy financial burden he was refused by the Surat merchants on the ground that this would set off a malpractice, since if the governors come to know about it, they too would request for the same.
The bankers not only financed the local merchants and Princes, in fact their most valued customers were the foreign traders. The English, Dutch, French all needed short term loans to meet their financial requirements. The bullions that they brought from home would be used up for minting and until they were converted to coins the Europeans had to run the trade by burrowing money from the bankers. In fact this delay in coin making was a deliberate attempt by the bankers to force the Europeans towards credit. In early eighteenth century the debt of the English Company to the merchants in Calcutta and Qassimbazar amounted to Rs. 0.7 million and Rs. 0.25 million respectively. In 1720/21 the Company’s debt in Bengal alone was Rs. 2.4 million and in 1747/48 it went up to Rs. 5.5 million! In the three years between 1755-57 the Dutch debt to the house of Jagat Seth amounted to Rs. 23,85,803.85. Even in the year of the battle of Plassey the Dutch borrowed 4 lakhs of rupees at 9 per cent and the French debt before the capture of Chandernagore was a million and a half.[xi] In fact the English Company borrowed heavily from the bankers in Qassimbazar to invest in the proper season. In March 1728 the Company borrowed 0.4 million from the market which caused much anxiety to the Directors sitting in London. They expressed their concern over the extravagant interest rate of 12% which in their term was, ‘cancer to the Company’s estate’. Occasionally the lending records were staggering, in Calcutta in the course of a single day in 1743, the English Company borrowed a sum of Rs. 8,25,000.00 from the merchants. And just a week later, the Company borrowed from the Jagat Seths a sum of Rs. 3,26,750.00 for paying advances to the investments.
As mentioned before that Jagat Seth lent money to the Company at an interest of 12% per annum, but on special request the then Jagat Seth, Fateh Chand reduced the interest to 9% on the condition that the English will exclusively borrow from him. The Company did not want break this trust since that would mean a rapid increase in interest rate. For fear of the loan going bad or apprehensions regarding ‘NPA’ the banker would only offer short term loans never going above one year. However the relationship between the borrower and the banker was not always sweet, occasionally the manager of the firm would seriously reprimand the English of not repaying within time. The Seths would often threaten the Company to arrange for all the dues, or pack their bags and start marching back home. This sort of sour-sweet relation existed until the English had won the Battle of Plassey.
After going through the entire article you must have felt that the big banks in Mughal Empire was not only a centre of wealth, but also the epicentre of power. The bankers had established a big control over the highest authority; by their extraordinary power to ‘purchase’ they could ‘buy’ a throne for their preferred candidate. Until the landmark victory of the English at Plassey the drain of wealth occurred from Europe to Asia and this was attested by the statement of Sir Thomas Roe, however post Plassey the economic situation reversed completely, from there on the wealth drained from India to Europe, or in unambiguous terms to England. The celebrated bankers on whom I have devoted paragraphs after paragraphs were reduced to state pensioners and by the late twentieth century their successors fought among themselves in court for a trifle amount of Rs. 800. So that was a brief discussion about the banking in Mughal India, some other time we may discuss about banking in British Raj.
[i] Trade and Trade Routes in Ancient India, By Moti Chandra
[ii] Mughal Rule in India, By Stephen Meredyth Edwardes
[iii] State and Locality in Mughal India: Power Relations in Western India, C.1572, By Farhat Hasan
[iv] Travels in India By Jean-Baptiste Tavernier
[v] Money and Markets from Pre-colonial to Colonial India By Anirban Biswas
[vi] Barons of Banking, By Bakhtiar Dadabhoy
[vii] Ahmedabad: From Royal city to Megacity, By Achyut Yagnik, Suchitra Sheth
[viii] Murshidabad. By L.S.S. O’Malley
[ix] Riyazu-s-Salatin, Ghulam Hossain
[x] The Mughal World: Life in India’s Last Golden Age, By Abraham Eraly
[xi] West Bengal District Gazetteers: Murshidabad – Page 166