A NEW BANK IN INDIA.
THE establishment of a Bank in India has for some time been contemplated by many of the leading merchants in this country, who in May last issued a prospectus of the proposed undertaking. Of course the scheme encountered objections, from those who at present have a profitable business as money-lenders and borrowers (more frequently the latter) and dealers in bills of exchange, in India. In reply to these objections, and in order to put the public in possession of the facts and circumstances which seem to render the establishment of a new Bank in India essential to the prosperity of that country, arid to the development of its commercial resources, a pamphlet has been published under the title of " Reasons for the Establishment of' a New Bank in India, with Answers to the Objections against it."
From this publication we learn, that, if a charter from the Crown and the permission of the East India Company can be obtained, a bank will be established, with a capital of five millions, divided into 50,000 shares of 1001. each ; to be managed by twenty.four Directors in England, nine in Calcutta, and subordinate Boards in Madras and Bombay ; the London Directors to hold not fewer than forty, the Calcutta than twenty shares each ; the former to be in office five, the latter three years from the date of their appointment, both to be reeligible by the proprietary. The natives of India to be eligible us Directors. The Bank is to confine itself strictly to the lending and borrowing of money, the issue of notes, payable on demand in gold or silver, as may hereafter be determined, and the sale and purchase of bills of exchange ; but on no account to invest capital in land or immovable securities, or to act in any mercantile capacity. Quarterly accounts to be sent to the Lon
don Board, whose control over the whole concern is to be supreme. A list of the names of the first twenty-four Directors is givA in the pamphlet : it includes partners in the principal houses in London, Liverpool, Manchester, and Glasgow,—such as Mr. THOMAS BARING, Mr. jOHN IRVING, Mr. MARK PHILLIPS, Mr. JOSEPH IIEGAN, Mr. JAMES OSWALD, and Mr. KIRKMAN FINLAY.
To show the necessity of a new Bank of India, it is stated, that at present there are only.four banks there, and only two of any importance,. the Bank of Bengal and the Union Bank ; whose united capital only amounts to 1,250,000/., and whose operations are confined to Bengal. In fact, most of the banking business is transacted by the great agency. houses in Calcutta, Bombay, and Madras : and nobody can forget the ruinous consequences of their system of banking.
"Most of these houses (we quote the pamphlet) were founded originally by retired civil servants of the East India Company, or by adventurers from Europe, without, in most instances, being possessed of any very considerable amount of capital. Besides being bankers, they were merchants, and some. times also indigo-planters and ship-owners; and to this vicious combination tl aruin in which so many of them have been involved may be primarily ascribed. Their credit being high, large sums, principally consisting of the savings of individuals in the Company's service, were deposited in their hands, for which they engaged to pay a high rate of interest; but, instead of employing these deposits as bankers in England would do, or as the proposed Bank of India would have done had it been then in existence, in the discount of approved bills at short dates, in the granting of cash credits, or in the purchase of Government securities readily convertible into money, they employed them in all manner of hazardous speculations,—advancing very large sums to indigo-planters, several of whom hail little or no capital of their own; exporting goods to Europe, China, 8sc. either directly on their own account, or indirectly by lending largely on the security of the goods to those who did ; becoming owners of Indian shipping, tec. Many of these speculations turned out extremely ill. The cultivation of indigo was so much increased, that its price gradually fell to a level at which it would not pay the expense of production ; so that very heavy losses were sustained, and much capital sunk by the planters and those by whom they had been propped up. The investments in Indian shipping turned out even
i worse than those in the ndigo-plantations, the shipping of England having nearly driven that of India out ot the field. At the same time that most of the houses in question had been thus getting themselves entangled in difficulties, several of their partners returned to Europe, taking large sums with them, as their share of the capital of the firms. 1 he embarrassment produced by this locking up of their capital, by the withdrawing of portions of it to Europe, and by the unfavourable termination of many of the adventures in which they had been engaged, began to manifest itself simultaneously with the scarcity of money occasioned by the drains on account of the Burmese war. The consequences are well known, and have been most disastrous. After struggling on, sonic fur a longer and sonic for a shorter period, most of the great houses alluded to have since failed ; and by their fall have produced an extent of distress not often paralleled in the history of such catastrophes."
The author of the pamphlet is at considerable pains to show the great benefit which the projected Bank must confer on a country, many of whose capitalists bury their money in the earth, and hoard it in other ways, from the want of a secure place of deposit, and in which commercial operations were continually impeded by the risk or the impossibility of conveying specie from one town to another. It is absurd to suppose that the vast capabilities of India can be developed in the absence of the commonest financial facilities.
There has been, it seems, some opposition raised to the Bank, on the ground that it will be a monopoly. But there will be no monopoly, in the proper sense of the word ; and supposing that the large amount of capital which the new Bank will possess, and other advantages arising. from undisputed responsibility, shoted keep inferior competitors out of the market, is that a reason why our Indian empire should be deprived of the benefit of a sound banking system ? Then, the rate of interest will be lowered. No doubt of it ; at least, it is to be hoped that such will be the case. The rate of interest in India is far too high for the good of any but the present masters of the money-market. Another objection is, that the distance of London from Calcutta will disenable the chief Directors from exercising an efficient control over the operations in India. There is some force in this ; but we are inclined to agree with the author of the pamphlet, that there are countervailing advantages in the separation from India, to place against the inconvenience alluded to.
" The Indian Directors, exposed to local influences, personal solicitation, 8cc. might, even with the best intentions, be betrayed into a line of conduct.preju. diem! to the real and lasting interests of the Bank ; but reports of thew proceedings being regularly transmitted to England, and examined by the Board resident here, upon which no such local influences can operate, all proceedings that might endanger, or that might impede the legitimate action of the Bank, will be checked, and the proprietors and the public will have the best attainable security for its proper management. Instead, therefore, of the double direction being a disadvantage' it is plainly an important circumstance in recommendation of the Bank, amid gives it an additional claim to the public confidence." We suspect that the real ground of the opposition of certain parties to the new Bank, is its anticipated competition with the business of those who make a large profit on the remittance of funds from India to England. But this is manifestly no reason for the refusal of a charter, or for the discouragement of the project by any except those personally interested in the established modes of remittance, who dread. theloss of an enormous percentage.
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