Cambridge University Press

Banias and the British: The Role of Indigenous Credit in the Process of Imperial Expansion in
Western India in the Second Half of the Eighteenth Century

Author(s): Lakshmi Subramanian
Source: Modern Asian Studies, Vol. 21, No. 3 (1987), pp. 473-510
Published by: Cambridge University Press
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Modern Asian Studies, 21, 3 (1987), pp. 473-5I0. Printed in Great Britain.
Banias and the British: the Role of

IndigenousCreditin the Process
of ImperialExpansionin WesternIndiain the
SecondHalf of the EighteenthCentury
LAKSHMI SUBRAMANIAN
Visva Bharati, Santiniketan
THE pressing preoccupation of the British administration in the early

decades of the nineteenth century to clip the wings of the malicious
Indian shroffs (Bankers) and their manoeuvres and secret dealings was
in sharp and in a sense valid contrast to their earlier perceptions of the
Indian shroffs and their Hundi empire. By I807, Mr Rickards, senior
member of the Bombay establishment, was urging the Governor-
General in Council to establish a General Bank whose operations would
extend throughout India, facilitate remittances and credit transfers
from one part of the country to another, and above all 'free the
mercantile body from losses and inconveniences suffered in the
exchange and from the artifices ofshroffs'.1 Their 'undue and pernicious
influence over the course of trade and exchange'2 could no longer be
treated with forbearance, and the urgency of remedy was stressed. It was
both strange and ironical that such advice should stem from a quarter
where in the crucial years of political change and transition in the second
half of the eighteenth century, the cooperation and intervention of the
indigenous banking fraternity and their credit support had proved vital
to the success of the Imperial strategy. The experience was admittedly
not unique to Bombay and the English East India Company (hence-
forth E.E.I.C) and in a sense the guarantee of local credit and the
support of service groups for a variety of reasons, was clearly envisaged
as a basic ingredient to state building in the eighteenth century. Almost
every category of successor states had their banking clients as it were-
the Jagat Seths of Murshidabad, the house of Kashmiri Mal in Oudh,
1 Parliamentary
Papers.Evidence before the Lord's Committee. East India Affairs 1813.
Extract of a letter from the Governor-Generalin Council dated 30 June 1809. For the
2 Ibid.
proposals of Mr Rickards see pp. 9iff.
0026-749X/87/0202-o907$05.oo ? I987 Cambridge University Press
473

474 LAKSHMI SUBRAMANIAN
the firm of Hari Bhakti in Baroda, the Poddars of Ramgarh and the
Hyderabad Sahukars are conspicuous cases in point. Little wonder that
Law de Lauriston, the ex-Governor-General of French India, recog-
nized the local banking community in 1777 as the decisive factor in any
future alliance of the French and Indian States against their inveterate
antagonist the English East India Company.3 As it transpired in fact,
the latter stole a march over the French in that they succeeded, and
more particularly in Western India, in aligning indigenous credit
cooperation to Imperial strategy to their advantage. A combination of
circumstances brought the authorities of Bombay and Surat into very
close association with the Banias-the foremost trading and banking
community of the region who operated a complex and well-integrated
credit exchange system that had traditionally serviced the elaborate
needs of the region's expanding commerce. The workings of the system
were very soon recognized as imperative to Bombay's existence not to
speak of its political projects for the future with the result that a relation
of symbiosis-an alliance based on reciprocity and mutual advantage-
unfolded between the British and the Bania. The latter would appear to
have been guided by tangible notions of'security' and 'protection' that
the Company alliance seemed to guarantee against the dislocation of
Mughal political authority along the West Coast. The Anglo-Bania
alliance-the alignment of the indigenous credit system to Imperial
strategy-became in effect the dominating factor in the history of the
West Coast during the crucial half century of transition, and constituted
in a real sense the prelude to the triumph of Bombay.
Structure, Resources and Functions of the Bania Community
Some preliminary observations on the Bania community of Western

India and on the credit and financial system they commanded forms a
convenient starting point. Contemporary documentation, which makes
frequent references to the term Bania, suggests a community of Hindu
and Jain merchants engaged in trade and banking, brokerage and
moneylending. The term essentially seems to have indicated an
occupational category drawing in a cluster of Hindu and Jain castes
specializing in commercial activity, although contemporary Europeans
were by no means clear whether the term Bania was coterminous with a
specific caste group or with a profession. Ovington, the English traveller
3
Quoted in C. A. Bayly, Rulers, Townsmenand Bazaars. North Indian Societyin the Age of
British Expansion, i77-i870 (Cambridge University Press, I983), p. I72.

BANIAS AND THE BRITISH 475
visiting Surat in 1689 found among the Banias twenty-four castes who
refrained from an indiscriminate mixture in marriages and even dining
in common but whose common vocational pursuit was trade.4 Walter
Hamilton at the turn of the nineteenth century associated the term with
both Hindus and Jains when he described the Vaneeya as a numerous
tribe of Hindus separated into many subdivisions in addition to the
Awaks or seceders from Brahmanical doctrines, i.e. Jains.5 Malcolm in
his exhaustive memoirs on Central India pointed to the overwhelming
preponderance of theJain castes within the Bania community in Malwa
and their close affinity and social interaction with the Hindu Vaishnav
sects, by virtue of their common Vaishya status. Both sections-Hindu
and Jain-of the Bania caste fell under two mutually exclusive
categories-Bissahs and Dassas.6 These social differences did not,
however, constitute the deciding factor of Bania identity. The term
Bania in the eighteenth century, as later, was a functional category
meaning trader and one applied to members of other castes who were
traders by profession.7 Occupation of a specialized sort was a key factor
in the upbuilding of the conglomerate Bania caste structure-eigh-
teenth-century bankers like Arjunji Nathji Tarvady and Aditram Bhat
and Khatri traders like Lala Jaimal and Lala Kashmiri Mal were as
much Banias belonging to the city Mahajan, a corporate body, a sort of
Chamber of Commerce.8 An early nineteenth-century report described
the term Vanee or Vaneeya as a settled or itinerant trader applied 'to
any caste following this profession and is not properly speaking a
distinction of caste. The term is universal and familiar from the banks of
the Ganges to Cape Comorin.'9
4 JohnOvington,A Voyage
toSuratintheYeari689,editedby H. G. Rawlinson(Oxford
University Press, I929), p. I65.
5 Walter StatisticalandHistoricalDescription andthe
Hamilton, Geographical, ofHindoostan
Adjacent Countriesin Two Volumes(London, 1920), p. 612.
6 A Memoirof CentralIndiaincluding Malwa andAdjoiningProvinceswith theHistoryand
CopiousIllustrations
of thePast andPresentCondition
of theCountry. SirJohn
By Major-General
Malcolm in Two Volumes.Vol. 2 (New Delhi: Sagar publications, 1970), pp. I60-2.
7 R. E.
Enthoven, The TribesandCastesof Bombay(Delhi, 1975, first published 1920),
vol. 3, pp. 412-22. According to Enthoven the term Bania was a functional term
meaning traderand one that applied to other castes who were tradersby occupation. He
identified forty subcastes within the Gujarati Bania community of whom six had Jain
sections, namely Mewada, Narsipura, Nema, Povad, Sarvirya and Shrimali. Among
Hindu Banias, subcastes were Agarwals, Agaryas, Deshaval, Kapol, Nagar, Oswal,
Palival, Pushkarval, and Sorathia.
8
India, OldandNew witha MemorialAddressbyE. W. Hopkins(New York, I901), pp.
I69ff.
9 Walker of Bowland
Papers I 78-1 830, National Libraryof Scotland, Acc. 2228. An
Account of Castes and Professionsin Gujarat. An unsigned memoir without date.

The influence of the Gujarati Bania community of Western India as

elsewhere at the turn of the eighteenth century derived from the variety
of commercial functions they performed, and their control of the money
market and credit structure. The sustained and almost uninterrupted
expansion of Maritime Gujarat's overseas trade in the sixteenth,
seventeenth and early eighteenth centuries had generated both a
substantial volume of circulating specie in the region as it had a wide
range of profit opportunities for interrelated mercantile activities of
brokerage and retail trading. The Banias, with their long trading
lineage, had been adept at exploiting the situation, and very soon
virtually monopolized the lucrative business of brokerage and banking.
Controlling the supply trade at crucial intermediary levels from the
primary production areas to the principal distribution centres inland
and on the coast they accounted for a sizeable and probably the most
influential section of Mughal Gujarat's commercial population.10 Of
greater import was their impressive access to ready credit and their
control over the local money market. The idiosyncracies of the Mughal
currency practices and procedure which placed an over-high premium
on the regional coin, i.e. a coin issued by the immediate ruling
authorities (and recognized as intrinsically superior in terms of silver
content to older coins issued in previous years and rendered inferior by
wear and tear), and the influx of bullion and foreign coins necessitated
the existence and availability of banking and exchange services.
Essentially these revolved around the business of testing, changing and
assaying old and foreign coins or bullion on payment of a discount or
Batta as it was known, and commission charges for the services rendered.
In theory, the official Mughal Mint authorities were expected to do the
needful for all importers of bullion, foreign and used coins free of charge,
but the inevitable delay at the mints during the peak season compelled
them to take resort to local and informal banking and exchange facilities
offered by the Bania shroffs (sarraffs).1 The latter, traditionally
associated with usury and in some cases deposit banking, had acquired
an easy and quick familiarity with conversion procedures and assaying
practices, and in course of time had arrogated to themselves the
1
Ibid.
" Ashin DasGupta, Indian Merchants and the Decline Surat 70oo-I750
of (Wiesbaden,
I979), for a general description of shroffsand their functions in Mughal India see Irfan
Habib, 'Bankingin Mughal India' in Tapan Raychaudhury (ed.), Contributions toIndian
Economic History,vol. I (Calcutta, 1960), and 'The System of the Bills of Exchange in the
Mughal Empire' in Proceedingsof the Indian History Congress.33rd Session, Muzaffarpur,
1972 (New Delhi, I973), pp. 290-303.

exclusive right to assay and change money. Drawing dividends from
trade and brokerage and sometimes administrative service, they
deployed it in buying substantial stocks of bullion imports coming into
the port cities-Surat in particular in the seventeenth century-and
thereby controlling the money market in terms of both supply of capital
and of exchange and discount rates. A communique issued to the Court
of Directors by the English factors at Surat dated 29 April 1636 summed
up the situation excellently:
Concerning the coining of your gold and silver into the species of this country, it
is free for us though not safe. We should have to do with such dangerous people
in the mint that we dare not adventure, nor will the most cunning merchants of
these parts upon any occassion, but sell all to shroffs to whom it is most
proper.12
The Bazar rate of exchange for any two currencies or for conversion of
bullion varied in accordance with seasonal fluctuations in local coinage
and with the availability of circulating specie and was enforced
rigorously. This was particularly true of the Batta or discount that
shroffs enjoyed in their loan and exchange transactions although
influential bankers of the eighteenth century like Arjunji Nathji
Tarvady and Atmaram Bhucan claimed that the preoccuation with the
Batta was but characteristic of their indigent kinsmen.13 Loans were
advanced to both Army and administration at a fairly high premium14
The other principal service offered by the Shroffs was remittance of
funds and proceeds and profits of trade through the medium of the
Hundi-the indigenous bill of exchange, probably the most central and
characteristic credit instrument of the banking system.15 Simply stated,
a Hundi was a written order, usually unconditional, made by one person
on another for the payment on demand or after a specified time, of a
certain sum of money at a particular place and after allowing a discount
which allowed interest and insurance charges and costs of transpor-
tation. The functions of the Hundi were then apparently twofold-to
enable one to get advances and or alternatively to remit funds from one
place to another without incurring the risks attendant on physical
transportation of specie across uncertain frontiers and insecure road-
12
Quoted in B. G. Gokhale, Suratin theSeventeenth A Studyin theUrbanHistoryof
Century.
Pre-ModernIndia (Scandinavian Institute of Asian Studies Monograph Series no. 28.
Curzon Press. London, 1979), p. I Io.
13 Mayor's Court Register (Bombay) of 1789, pp. 4095-156. Case of Hiranand
Tesban vs Haribhai Bhaidas taken up on 3 November 1789.
14 An Account of Castes and Professionsin
15 C. N. Gujarat (see n. 9).
Cooke, The Rise, ProgressandPresentConditionof Bankingin India (Calcutta,
I863), pp. 82-3.

ways. The expansion of Gujarat's overseas trade coming in the wake of

political consolidation of the greater part of the subcontinent under the
Mughals had resulted in the emergence of widely integrated Hundi
network enabling merchant, administrator, soldier or even tourist, as
Tavernier's case revealed, to utilize it whenever necessary. The Gujarati
Banias, involved as they were in internal trade and in the movement of
export commodities from procurement areas and distribution centres to
points of shipment had taken full advantage of the increasing demand
for credit and remittance agencies in the seventeenth century to head the
Hundi business as it were. The Kothis or agency houses of the Gujarati
Banias were to be found virtually in all the principal centres of trade in
the subcontinent-the most important of these being Lahore, Agra,
Burhanpur and Murshidabad, not to speak of Gujarati towns like
Baroda and Broach. Surat constituted in the seventeenth century the
nodal point of the credit exchange system. Hundis for transmission of
cash advances to any recognized urban centre in Hindustan were
available in the local money market. To put it in Tavernier's eloquent
style:
As all the goods produced in the Empire of the great Mughal and a portion of
those of the kingdom of Golkonda and Bijapur reach Surat to be exported by
sea to different places of Asia and Europe, when one leaves Surat to go for the
purchase of these goods in the towns whence they are obtained as at Lahore,
Agra, Sironj, Burhanpur, Dacca, Patna, Banaras, Golkonda, Deccan, Visapur
and Daulatabad, one takes silver from Surat and disposes it of at places where
one goes giving coin for coin at par. But when it happens that the merchant
finds himselfshort of money on these places and that he had need of it to enable
him to pay for the goods which he has bought, it is necessaryfor him to meet it at
Surat when the bill is due which is at two months and paying a high rate of
exchange [i.e the Hundi system was being used not merely to make remittances
but to raisecredit for long-distance trade] at Lahore on Surat the exchange goes
up to 6 I/4 p.c., at Agra from 4\ to 5 p.c., at Ahmedabad from I to I\ p.c., at
Sironj to 3 p.c., Dacca to o p.c., at Patna from 7 to 8 p.c., at Banarasto 6 p.c.; at
these last places they only give letters of exchange on Agra, and at Agra they
give others on Surat the whole only amounting to the sum I have stated-at
Golkonda from 4 to 5 p.c., Goa the same, Deccan 3 p.c., Bijapur 3 p.c., at
Daulatabad from I to I\ p.c., in some years the exchange risesfrom I to 2 p.c.,
when there are Rajas or petty tributary princes who interfere with trade each
claiming that the goods ought to travel his territory and pay him customs.
There are two in particular between Agra and Ahmedabad one of whom is the
Raja of Dantiwar and the other the Raja of Beigam [probably Wangaon or
Wankaner] who disturb the merchants. One way, however, of avoiding passing
the territoryof the two princesis by taking another route from Agra to Surat by
way of Sironj and Burhanpur, but these are fertile lands intersected by several
rivers, the greater number of which are without bridges and without boats and

it is impossible to pass until after the rainy season. It is for this reason that the
merchants, who have to be at Ahmedabad in the season for going to sea,
generally take their way through the country of these two Rajas because they
are able to traverse it at all seasons even in the rains. Besides it is not to be
wondered that the exchange is so high for those who lend the money run for
their part the risk that if the goods are stolen, the money is lost to them.16
Merchants, administrators and Companies made extensive and regular

use of the credit-exchange system whose efficiency and efficacy were
universally accepted. Hundis in this period seem to have been of two
categories: Darshani or payable on presentation, and Mudati or
payable after stipulated time or given date. Both types of Hundis are
classified by Bhargava into four kinds: Sah Jog which were negotiable
but payable only to a Sah or respectable person, Dhani Jog not
negotiable and payable only to a Dhani, Firman Jog negotiable by
endorsement of the person named to whose order it is drawn, and
Dikhavankar negotiable by delivery in person only. Besides there was in
this period a variant of the Mudati Hundi called Jokhami-a documen-
tary bill of exchange corresponding to the present-day bill of lading.17
Payment of aJokhami Hundi depended on the safe arrival or otherwise
of goods for the payment of which the Hundi related. In ordinary
Hundis, there was no indication for the arrival of the goods and these
were normally, as a rule, honoured on presentation, but Jokhami
Hundis were marked by this peculiar usage that they could be paid by
the drawee only after the goods had arrived. If, after payment, it was
discovered that the goods specified had not arrived or that a portion of it
had been lost, the drawer was liable to compensate the loss. In other
words, he took upon himself the insurance risk of the goods covered by
the payment of the Jokhami, which was why the rate of exchange was
higher than that of an ordinary Hundi.
The Bania shroffs who operated the money market and credit system
of Western India appear to have been of different and distinct but
necessarily interrelated categories. At the apex of the system stood
influential banking houses like those ofVirji Vora and ShatidasJhaveri,
based at Surat and Ahmedabad, the two great financial capitals of
Western India in the seventeenth and early eighteenth centuries, and
who dominated the bullion bazar by their extensive speculations,
16
J. B. Tavernier, Travels in India, by Jean Baptiste Tavernier,Bishop of Aubonne.Edited
by W. Cooke, translatedby V. Ball, in 2 vols (Oxford University Press, 1925), vol. I, pp.
3off.
17 B. K. Bhargava, IndigenousBankingin Ancientand MedievalIndia (Bombay, n.d.
preface Feb. 934, Jaipur, Rajasthan), pp. 140-7.

purchases and loan transactions. They had their network of constituents

and agents entrusted with their business all along the Hundi network.
Below them stood intermediary bankers whose operations were rela-
tively smaller in scale and scope but none the less important. Hundis for
medium sized sums could be brought through their contacts; in fact even
the principal bankers negotiated with them often for both Hundis and
deposits. To quote the Surat factors' observations on such a transaction:
Those that are great monied men here in town and live only upon interest,
receive from the shroffs no more than 8 p.c., per month. The shroffs, they
dispose of it to others at from I to 2A p.c. running some hazard for the same and
that is their gain. Now when a shroff (for lucre) has disposed of great sums to
persons of quality at great rates not suddenly to be called in to serve his
occasions, then begin his creditors (as in other parts of the world) like sheep to
run over the neck of another, and quite stifle his reputation. Thus very
opportunely to our purpose, have the famous shroffs been served within a
month, one of which failing for over 3 lacs of rupees, diverse men have lost great
sums and others totally undone therebywhich has caused men of late to be very
timorous of putting their money in shroffs' hands.18
The inter-links between the two broad tiers of the credit system
remained strong and operative even during the later half of the
eighteenth century when the leading shroffs relied on the deposits and
Hundis of their smaller brethren. 19 On the lower rungs of the hierarchy
were the small-time usurers and moneylenders who lent inconsiderable
sums against security of jewels and property.
To sum up, the indigenous credit and banking system of Western
India was marked by a degree of specialization and sophistication and
had evolved in response to contemporary requirements of trade and
commerce. The system serviced and sustained efficiently Surat city's
expanding commerce, facilitating transactions of individual merchants
and trading Companies alike. The city administration, unlike their
counterparts in Bengal, did not, however, utilize the services of the Surat
banking families for transmission of the Imperial tribute to Delhi.
Paradoxically enough, it was left to the English East India Company
authorities of Bombay and Bengal to perceive and exploit the possibili-
ties and potentialities of utilizing the credit network system to service
and finance their political projects. The success they enjoyed on this
18
Quoted in Gokhale, Surat in the Seventeenth
Century,pp. 129-30.
19 The
agent of the Benares banker Manohardas Dwarkadas in 1795 informed the
English Chief at Surat that his cash reserves were made up of deposits of small and
middling shroffs of the city. See Surat Factory Diary (henceforth S.F.D.) no. 687 of
1795. P. 31 I, Representation from agent of Manohardas Dwarkadas dated 13 August
I795.

BANIAS AND THE BRITISH 48I
RAS BANIA CREDIT
MAIN CREDIT CENTRES *
SUBSIDIARY CENTRES *
CREDIT LINES
Map 1. Credit lines in late eighteenth-century India.

I would like to acknowledge the kind assistanceoffered by R.H. Grove,
Darwin College, Cambridge,in preparingthis map.
Map I. Credit lines in late eighteenth-century India.
I would like to acknowledge the kind assistance offered by R. H. Grove, Darwin College,
Cambridge in preparing this map.
score was both important and conspicuous and set the stage, as it were,
for the Anglo-Bania alliance that would dominate the history Qf the
West Coast over a period of five decades. That brings us to the central
issues of the present paper: the inter-play and relationship between the
Banias and the rising British power of Bombay.

The Crisis of the Eighteenth Century and the Bania Response
The role of local collaboration in the developing Imperial strategy of the

E.E.I.C. authorities of Bombay has largely to be understood in the
context of the eighteenth-century crisis and its implications for the Bania
community of Surat city and the credit system they operated. Recent
studies have demonstrated that the crisis assumed in Surat a dual aspect:
the collapse of the Mughal political system in the city accompanied by
Maratha raids against the province and the disruption of the city's
traditional trade and Muslim shipping in the Western Indian Ocean
followed by the phenomenal expansion of European, in particular
English, private trade in the area.20 Both sets of developments had
serious consequences for the city's merchant population, Bania and
Muslim alike. Insecurity of transportation and rupture with the
hinterland-the most immediate outcome of Mughal decline-threw
into shambles the inland trading and credit network, while contraction
of trade dislocated both the money market and dried up business and
brokerage opportunities for the Banias. To this catalogue of unending
disasters, was added from the I72os and 730s the collapse of the urban
order in Surat, internecine struggles among the ruling elite for power
and position, and their ruthless pressure on the city's merchant
population for revenues. The protest movement organized by Surat's
merchant body against the administration in 1730-32 did not funda-
mentally alter matters, compelling them as a result to look for other
options.21 For the Bania community, by and large the only viable
alternative in sight was protection of the E.E.I.C. authorities ofBombay
and Surat. As early as the thirties of the century, the Gujarati Banias had
begun to rely very extensively on available English shipping to maintain
their trading links with Bengal and the gulfs of Arabia and Persia and
simultaneously to keep the Hundi line in working order.22 Likewise in
20
DasGupta, Indian Merchants and the Decline of Surat; P. J. Marshall, East Indian
Fortunes. The British in Bengal in the Eighteenth Century(Oxford, Clarendon Press, I976),
and Holden Furber, Bombay Presidencyin the Mid-Eighteenth Century(New York, 1975).
Furber, however, contends that the expansion of European private enterprise in the
Western Indian Ocean in the 1720s and 1730s was not at the expense ofGujarati-owned
shipping.
21 Ashin DasGupta, 'The Crisis at Surat, 1730-1732', Bengal Past and Present,
LXXXVI, Diamond Jubilee, pt II, no. 162, I967.
22 The
Gujarati merchants were in fact by the I730s offering the most valuable
freights for English shipping, so much so that in 1731 they complained to the Nawab of
Bengal that they would be very great sufferers from any interference with British
shipping. See Marshall, East Indian Fortunes, p. 79.

the following decades they began increasingly to use Bombay as an
alternative port of shipment and unloading for reasons of greater safety
the island city afforded.23 The advantages of the Company connection
became more appreciable in the fifties when the Company authorities at
Surat toyed with the idea of intervention in local politics and projected
the image of the benevolent protector of the fair trader against
Government oppression.24 The diplomatic success the English factors
enjoyed vis-a-vis the ruling administration in safeguarding the position
and privileges of the Bania merchants enjoying Company protection,
and the possibility of resuming commercial activity from Bombay
reconfirmed the Banias' confidence in the English connection. The
shroffs of Surat city took the initiative in 1758 and openly urged the
Surat factors to take over command of the Castle and office of the
Qjladar and thereby neutralize the powers of the ruling Muslim elite
and the inquisitive Marathas.25 The suggestion, however, did not
materialize until the following year when the Company authorities
finally took the decision to intervene in the city's politics. Backed by the
unanimous support of Surat's Bania population who through their
spokesman Jagannathdas Laldas declared their allegiance to the
Company and urged them to take over the Government in Surat, the
Company authorities moved into the city and captured the Castle on 4
March I759.26 A treaty of agreement with Meah Achan, the ruling
Nawab, was signed and the English in accordance with its provisions
secured command of the Castle and the Imperial Fleet with its attendant
Tankha. As Qiladars or Governors of the Castle, the Company enjoyed
full authority over matters of succession to the Nawabship as well as
other important subordinate posts. They exercised the right to act as
mediators in all disputes between the Nawab and other trading
Companies-the Dutch and French-in Surat as well as the Maratha
Chauteas or the agents of the Peshwa and Gaekwad who were entrusted
with the collection of a fourth of the city's revenues. These were very
23
L. Subramanian, 'Bombay and the West Coast in the 1740's', Indian Economicand
Social History Review, vol. VIII, no. II, I98I.
24
L. Subramanian, 'The Castle Revolution of I759 and the Bania Community of
Surat' in Papers on Business History of India organised by the Indian Institute of
Management, Ahmedabad (forthcoming).
25 Ibid.
26
S.F.D. no. 4 of 1758, p. 25, Letter from Surat dated 22 January 1758 received by
the Bombay Council on 27 January. Also see Public Department Diary (P.D.D.) of the
Bombay Government no. 32(I) of 1759, pp. 99-I02, Letter from John Spencer to
Richard Bourchier, Governor of Bombay, dated I i January 1759 and S.F.D. no. 14(I)
of I759, pp. 224-6.

substantive privileges which would henceforth enable the Company to

control the administration at Surat.27
The Castle Revolution in 1759 came thus as the high point of the crisis
of the century with the tottering Muslim administration finally
relinquishing control to the upstart English Company authorities of
Bombay and Surat. Elsewhere along the Coast, too, was a time of
transition; the naval superiority and success of the Bombay Marine over
native semi-autonomous coastal chieftains like the Malwans, Angrias
and the Desai of Savantwadi indicated a changing balance in the
equations of power. For the Banias, the new political developments were
not unfavourable, given the fact that these served to guarantee a
minimum degree of political security and stability. This in fact
constituted the overlying consideration behind their decision to promote
in I759 the political claims of the E.E.I.C. authorities in Surat-the
entry point for control of the Northward (as Gujarat was known).
Furthermore, it was anticipated, and not without reason, that the
Company's efforts to develop Bombay as the principal mart of the West
Coast would promote a general revival of trading and commercial
activity. These expectations were not belied and the English association
came to yield in the course of the century unexpected but substantial
dividends. These arose largely from the nature of the financial
difficulties the Company authorities of Bombay confronted from the
I76os onwards and the strategies they adopted to tackle them.
Essentially the Company's growing requirements of credit and
exchange assistance constituted a new source of business to the Bania
shroffs whose intervention was made possible by the reactivation-
albeit limited-of commercial activity directed from Bombay and
Surat.
The Emergence of the Anglo-Bania Order-Origins and Ante-

cedents
While the Castle Revolution of 1759 and the systematic infiltration of

the English Company into the power structure of Surat was no passing
fancy, it soon became obvious that the Company's triumph was being
undercut by the serious pecuniary crisis the authorities faced and which
precluded any possibility of future expansion and consolidation. One
27
P.D.D. No. 33(11) of 1759, p. 252, Letter from Surat dated I November and
received by the Bombay Council on I8 November i759.

major problem the Bombay Government began to confront from the
I76os onwards was that of insufficient financial resources to support
their establishments-civil and military-and to preserve their newly
acquired political gains. Bombay as a trading settlement had no land
revenue to speak of and in a period of languishing trade could hardly
boast of substantial custom returns either.28 Under the circumstances,
alternative agencies of finance and revenue had to be sought if the
Bombay establishment were to survive, and if its annual Gujarat and
Malabar investments were to continue. The necessity became more
pressing as the financial crisis of the Bombay Government worsened
over the years under review: this was clearly reflected in the two
estimates drawn up by the Accountant-General of the Bombay
establishment, once in 773 when he observed that nearly Rs 15? lakhs
were necessary for the requirements of the presidency, and again in 1789
when it was estimated that the presidency would need Rs 56 lakhs
approximately.29
Two solutions suggested themselves, both involving the cooperation
of the Bania community of the region and the financial system they
operated. The Bombay Government could, for one, approach the Bania
bankers of Surat city for short-term loans at prevailing interest rates.
Alternatively, they could request the Supreme Government in Bengal to
divert the surplus revenues of the province (provided by the acquisition
of the Diwani in 1765) to Bombay through the already existing
remittance network of the Gujarati Bania shroffs. Any transfer of funds
particularly on a large scale and on a regular basis had to be effected
invariably through the Hundi network that stretched right across the
subcontinent connecting Surat with Murshidabad. Direct transfer of
specie was neither a viable nor an efficient proposition; for one it took
time and for another there were tedious calculations to be sorted out in
fixing and determining the exchange ratio of the Murshidabad Sicca
Rupee to the Surat Sicca Rupee. The Bania shroffs long familiar with
matters such as currency differences, alloy content and exchange rates
28 The value of
Bombay's overseastrade in the 740s and the I 75os was unimpressive
and the city's imports averaged in value around Rs 1,503,929. We have no figures for
Bombay's exports during this period. See Commercial Department Diary (henceforth
C.D.D.) of the Bombay Government no. 36 of 1803, pp. 4oofffor an extensive statement
on the external commerce of Bombay.
29 P.D.D. no. 63 of 1773, p. 395, Consultation Meeting of the Bombay Council of
7
May I773, and no. 94 A of 1789, pp. 19-20, Letter from Fort William dated o0
December 1788 received by the Bombay Council on I 3January 1789. The Accountant-
General emphasized in the Council meeting that the Government would require Rs 56
lakhs to maintain its expenses.

showed the easy way out by drawing and discounting Hundis for large
sums of money and making funds available whenever and wherever
necessary. The English Company authorities of Bengal and Bombay,
aware of the advantages of utilizing the local credit exchange system and
remittance facilities lost no time in contacting the shroffs who now
appeared as a major and decisive component in their political
calculations. Fort William directed their subordinates at Bombay to
make arrangements with the Surat bankers to persuade them to
advance money in Bombay in exchange for Company bills on Bengal
issued in favour of their (shroffs') correspondents at Calcutta or
Murshidabad as the case may be. At the same time, they decided to
utilize the services of the Gujarati shroffs in Bengal, buy their Hundis in
favour of the Bombay Government and have them despatched to
Bombay. The procedure outlined above--its workings and success-
depended clearly on the ability and willingness of the Banias to
cooperate as bankers and financiers. The stage was thus set for the inter-
play of indigenous credit intervention and Imperial policies, for the
emergence and fruition of the Anglo-Bania alliance.
The Bania-British partnership crystallized over a span of five decades
and in two distinct and identifiable stages. In the first phase, that is
between I760 and 1780, the scope of Bania cooperation was limited as
were British political and commercial objectives. During these years, the
maintenance of the Bombay establishment, upkeep of the army and
financing of the annual investments remained the principal concerns of
the Bombay Government. Even these, however, appeared insurmount-
able problems forcing the Bombay authorities to make regular entreaties
to the Surat bankers and to their superiors at Fort William. By the late
I 77os, the attitude of the Bombay Government underwent a substantial
change when in their efforts to extend Bombay's maritime hinterland

they became involved in war with the Maratha Confederacy. There-
after the situation changed perceptibly in terms of both the expanding
scope of the Bombay Government's political and commercial ambitions
and of the Bania resources backing it. This trend continued during the
last decades of the century and the turn of the nineteenth which saw an
expansion in Bombay's trade with China and with it the aggressive
politics of the Bombay merchants. Underlying these developments was
the overarching assistance of the Bania bankers, and for the projects of
both merchant and ruler their cooperation became the deciding factor.
It was in the I 76os that the alarm signals of the Bombay Government
began to be sounded and preliminary agreements with the shroffs for
regular transfers and tenders of money were made. These transfer

negotiations-loans for Company's bills on Bengal-were in themselves
an indicator that Western India's trading links with Bengal were
adequately viable and sustaining. The consolidation of the Gaekwad's
power in Baroda, the quickening pace of trading activity along the coast
oriented towards Bombay and the growing importance of Bombay's
trade with Bengal demonstrated by custom returns implied in effect a
continuing demand for transfer facilities.30 Gujarati Banias who had
been traditionally engaged in trade with Bengal and some Armenian
families stepped forward to negotiate with the Company for Bengal bills.
Most of them seem to have been medium-sized bankers like Vanarasidas
Jaidas, Cushaldas Caundas, Kesavdas Vallabhdas, Atmaramdas Jag-
jeevandas, the only exception being Arjunji Nathji Tarvady but whose
performance and participation was still inconspicuous.31 One interest-
ing fact about these early negotiations was the relative strength of the
shroffs' bargaining power vis-h-vis the Company authorities on the issue
of exchange. On I I June I762, the Bombay Council was informed by
their subordinates at Surat that the negotiations for Bengal bills (i.e.
cash advances against bills drawn on the Company in Bengal) at the
stipulated exchange rate Surat Rs I Io per Murshidabad Sicca Rs Ioo
were being disputed.32 The Council peremptorily ordered the postpo-
nement of all pecuniary transactions with the shroffs only to revoke
them almost immediately.33 With an empty treasury and with bank-
ruptcy threatening to impede their investments, a quick and amiable
settlement with the shroffs was considered by the Bombay Council in
their meetings of 2 August 1763 as the only answer.34 The Bengal
Government took a sympathetic view of the matter and agreed to
answer drafts to the tune of Rs 3 lakhs.35 These drafts were promptly
discharged and the money that flowed into Surat treasury from the
30 L.
Subramanian, 'Capital and Crowd in a Declining Asian Port City. The Anglo-
Bania Order and the Surat Riots of 1795', ModernAsianStudies,vol. 19, pt 2 (April 1985),
pp. 213-I5.
31 P.D.D. no. 37(II) of 176 , p. 38 , Consultation
Meeting of the Bombay Council of
i May I761. S.F.D. no. i5(ii) of 1759-61, p. 323, Letter signed to Bombay on io May
1761, and p. 332 for letter signed to Bombay on I2 June 1761 notifying the Council of
their transactions with smaller shroffs for sums ranging between Rs 6000 and Rs 9500.
32 P.D.D. no. 38 of I762, p. 331, Letter from Surat dated 5 June and received
by the
Bombay Council on I I June I762.
33 Ibid., p. 333, Consultation
Meeting of the Bombay Council of 15 June 1762.
34 P.D.D. no. 41 (I) of
1763, p. 72, Consultation Meeting of the Bombay Council of 2
August 1763, p. 85, Letter addressed to Surat on 13 August I763.
35 P.D.D no.
4I (I) of 1763, p. I44, Letter from Fort William dated 17 June 1763 and
received by the Bombay Council on 14 September 1763.

Bengal remittances was conveyed through the medium of the Angras

(native couriers) or as Hundis on the Bombay shroffs-the agents of the
Surat bankers. In the following years, too, the intervention of Fort
William proved decisive as the authorities continued to honour drafts
worth Rs 5-52 lakhs. Draft from Bengal also steadily increased from Rs
8 lakhs in I768 to I2 lakhs in 1769.36
Relations between the city shroffs and the English authorities took on
a discordant note once again in the I770s when the exchange rate
between the Surat Rupee and the Murshidabad Sicca Rupee took a
plunge downwards compromising negotiations even further. The
Government's expenses, too, by this time had registered a substantial
enhancement and in the estimate of expenses drawn up by the
Accountant-General and presented before the Bombay Council on 2
February 1770, it was observed that the Government would require no
less than a sum ofRs 12 lakhs for the ensuing year out of which Rs 8 lakhs
had to be provided by the end of May. The Bombay Council debated for
a while over the feasibility of the two options they had before them for
raising cash supplies: one was to borrow from the local credit market and
the other to negotiate for Company bills. After due deliberation, the
shroffs were approached and with considerable difficulty Rs 7 lakhs
were provided for in exchange of Bengal bills to that amount.37
However, this as well asan additional remittance of Rs 7- lakhs from
Fort William did not prove adequate, and on 9 September I770 the
Bombay Government wrote to their superiors at Fort William that they
needed supplies to the extent of Rs 15 lakhs by the end of May 177 and
Rs 6 lakhs immediately for the current year's expenses.38 On II
October, they directed their subordinates at Surat to draw on Bengal
and once again the controversy started on the inevitable issue of the
exchange rate.39 This was specified by the Bombay Council at Surat Rs
36 P.D.D. no. 5o(I) of 1768,

p. Ioo, Advices from Bengal dated 30 November 1767
and received by the Bombay Council on 20 January 1768. The Bengal Government
announced their intention of remitting Rs 5 lakhs to Bombay. Also see P.D.D. no. 54 of
1769, p. I45, Letter from Surat received by the Bombay Council of 22 August 1769,
informing the latter that they had received Rs 7 lakhs from Bengal.
37 P.D.D. no. 55 of 1770, pp. 88-9, Consultation Meeting of the Bombay Council of 2
February I770; pp. I80o-, Letter from Bengal dated I6January 1770 and received by
the Bombay Council on Io March 1770; p. 345, Letter from Bengal dated 3 April and
received by the Bombay Council on I I June 1770; p. 347, Letter from Bengal dated 24
April and received by the Bombay Council on 6 June 1770.
38 P.D.D. no. 56 of 1770, p. 53, Consultation
Meeting of the Bombay Council of g
September 1770.
39
Ibid., p. 53, Letter to Bengal signed on 9 September I770, p. I27, Letter to Surat
signed on I October I770.

99? per Murshidabad Sicca Rs I 00 and which they reckoned as a major
concession to the shroffs.
This latitude as it turned out did not appear sufficient inducement for
the shroffs to come forward with their help, and the Surat factors
notified Bombay that they did not expect to procure in the course of one
month more than RsI- lakhs. Meanwhile, the exchange rate in the city
had fallen to Surat Rs 95 per Murshidabad Rs Ioo.40 The Surat
Council, impatient with Bombay's uncompromising attitude which
under the circumstances seemed otherwise, came up with a sharp and
swift rejoinder. It was impossible, they pointed out in their advices of 29
October I772, to grant bills on terms less than Surat Rs 96 per
Murshidabad Rs ioo.41 The Bombay Council gave in and it was on a
note of resignation that orders were issued on I November 772 to grant
bills on terms asked for. 'Without this latitude', they confessed, 'we are
convinced that they will not be able to procure any considerable sums as
the shroffs give bills on Bengal at an exchange much more favourable to
the remitters.'42 The following year saw a repeat performance, the
government acknowledging the precarious state of their finances and
finally acquiescing in the demands of their bankers.
The Accountant-General's report submitted on I7 May I773
specified Rs 15 lakhs as the minimum amount required for the ensuing
twelve months.43 The report stressed the financial weakness of the
Government and the urgent necessity of finalizing arrangements with
the bankers. Even before the estimates were prepared, the Surat factors
had been directed to approach the city's shroffs for Rs 4 lakhs in
exchange of Bengal bills at the exchange rate of Surat Rs 96 per
Murshidabad Rs ioo. The shroffs adopted a line of non-cooperation and
informed the factors that they were not in a position to accept Company
bills, as drafts were coming on them from Bengal for considerable sums,
and that unless the exchange rate was lowered, they could not consider
payment. The Bombay Government was at a loss how to deal with the
situation, and as they confessed to the Fort William authorities in their
letter of 15 August 1773, 'We are sensible that bills drawn from here on
their factory were at an unfavourable exchange rate, it had been our
constant endeavour to obtain money on favourable terms, but the
40
P.D.D no. 62 A of 1772, p. 83, Consultation Meeting of the Bombay Council of i 3
October 1772. Also see p. 96, Letter addressed to Surat on i6 October I772.
41
Ibid., p. I22, Advices from Surat received on 29 October I772.
42
Ibid., p. 83, Consultation Meeting of the Bombay Council of 13 October 1772 and
p. I50, Letter addressed to Surat on i November I772.
43 P.D.D. no. 63 of 1773, p. 395, Consultation Meeting of the Bombay Council of 7
May 1773.

merchants and shroffs taking advantage of the difficulties we lay at times

under want of specie had withheld their money until we complied with
their terms.'44 The advices from Surat only reconfirmed the Bombay
Council's misgivings. In their letter of 2 August 1773, they maintained
that the only way to raise money was to negotiate for bills on Bengal by
lowering the exchange rate or to induce the shroffs to lend for three
months.45 Eventually the Government decided to give in to the bankers,
albeit reluctantly. The Council meeting of I January 1774 summed up
the situation succintly: 'We lament', it observed 'the necessity to draw at
so disadvantageous an exchange but the distress the Company's affairs
continue to be in for want of specie will not permit us to revoke our
orders.'46 Their position could not have been better stated: the acute
financial pressure faced by them was a harsh reality that had to take
precedence in the negotiations with the bankers.
From I773-74, remittances from Bengal began increasingly to
replace Bengal bills as the principal source of finance for the Bombay
Government. These increased substantially in volume from Rs 5 lakhs
approximately between 1765 and 1773 to nearly Rs 15 lakhs in 1774.47
Shroffs handling these remittances and discounting them in Surat were
Arjunji Nathji Tarvady, Atmaram Jagjeevandas, Tapidas Laldas,
Goculdas Brandavandas, Maya Shankar and Atmaram Bhucandas.
These merchants assumed responsibility for the discharging of the bills
despatched by the Fort William Council and for their conveyance to
Bombay-the second stage of the transaction-in the form of Hundis
drawn on their agents in the island city. The financial transactions of the
English East India Company had by this time clearly contributed to an
extension of the credit exchange network into Bombay. The Mayor's
court registers of Bombay are replete with references to the money
merchants-big and small-venturing to take up residence in the new
city. The traditional credit route connecting Surat with Murshidabad
and Calcutta via Burhanpur, Indore, Seronge, Agra, Allahabad,
Benares and Patna was thus being made extensive use of in the broader
context of renewed commercial activity in Western, Central and parts of
Northern India in response to the stabilization of the Gaekwad's and
44
P.D.D. no. 64 of 1773, p. 75, Letter addressedto Fort William on 15 August 1773.
45
Ibid., p. 95, Letter from Surat dated 20 August and received by the Bombay
Council on 25 August 1773.
46 P.D.D no.
65 A of 1774, p. 17, Consultation Meeting of the Bombay Council of I I
January 1774.
47
Ibid.,p. 71, Letter from Fort William dated 9 December 1773 and received by the
Bombay Council on 2 February 1774.

Sindhia's power after the reverses of Panipat and to the directing
influence of Bombay. New credit points like Bombay along the coast and
Indore and Gwalior inland were emerging or in many cases reappearing
to expand the contours of the Hundi labyrinth. The utility of these credit
centres was soon recognized during the years of the first Anglo-Maratha
war (1775-82) when Bania cooperation reached its high point and when
their Hundis became the principal instruments of supplies to the British
armies in the distant theatres of war.
The events leading to the Maratha war are too well known to be
repeated here in detail. Strategic consideration-the growing resolve to
develop Bombay's maritime hinterland by annexing the islands adja-
cent to Bombay (Salsette, Bassein, Elephanta and Hog) brought the
Bombay Government into conflict with the Marathas. Succession
disputes in Poona-the citadel of the Peshwa's power-following in the
aftermath of the murder of Peshwa Narayan Rao encouraged the
Bombay Government to step in. Raghunath Rao, one of the principal
contenders was turned out of Poona on a charge of treason and murder
and appealed to the Bombay Council for help. The Council responded
to his appeals while demanding Bassein and Salsette as the price of
support. On 6 March 1775 the Council concluded the treaty of Surat
with Raghunath Rao by which they promised 2500 English troops to
restore Raghunath Rao in Poona in return for Salsette and Bassein and
the expenses of the campaign with Rs 6 lakhs in addition. The Treaty
was, however, condemned in very harsh terms by the Calcutta Council
and the elaborate justification of the Bombay Government for their
course of action went unheeded. In 1776, the Treaty of Surat was
replaced by the Treaty of Purandhar by which peace was restored on
payment of Rs 12 lakhs with the retention of Surat. The cause of
Raghunath was abandoned. The situation assumed yet another curious
turn with the Court of Directors advocating an interventionist policy.
The Surat Treaty was revived and military operations were set afoot but
with no tangible gains. In 1782, both sides were anxious for settlement-
the outcome of the decision being the Treaty of Salbai.48
These years of confused diplomatic activity and military operations
cost the already bankrupt Bombay Government heavily in terms of
army maintenance and other related expenses. Furthermore, given the
fact that war operations were conducted in several and dispersed
stations, there was the added necessity of remitting funds from Bombay
to the army generals directing operations there. Under the circum-
48
The Oxford History of India, pt III, by Percival Spear (Oxford, 1958), pp. 51off.

stances, the Hundis of the Bania shroffs assumed vital importance.49

The Company authorities lost no time in making very basic arrange-
ments for remittance of funds and the Banias on their part at this hour of
need rose to the occasion. As far as they were concerned, the business of
transfer and remittance of funds for political more than commercial
purposes was yielding them substantial dividends and they saw no
reason therefore to withold their cooperation.
The volume of remittances from Bengal increased between 1778 and
1779 to Rs 25 lakhs-the shroffs at Surat promptly encashing them and
conveying them to the military forces through Hundis drawn on their
correspondents with Gujarat where credit lines had emerged and
ramified.50 Between 13 June and I6 September 1780, Rs 42 lakhs were
remitted in bills of exchange drawn on the Surat shroffs with
Manohardas Dwarkadas, Arjunji Narthji Tarvady, Itcharam Jagjee-
vandas, Goculdas Brandavandas, Atmaramdas Bhucandas and Moti-
chand Bhucandas taking the lead.51 On Io July I78i two bills of
exchange for Rs 7 lakhs were drawn on Manohardas Dwarkadas and
instructions issued to remit the same to General Goddard's fighting
forces in Gujarat.52 The Hundi network was clearly working to British
advantage funnelling the money supplies to the Company's armies
scattered all over the province.
Local credit cooperation in the form of large-scale and intermediate
remittance facilities had thus by the eighties of the century become
indispensable to the existence of the Bombay Government and its
politics. The Company officials were fully cognisant of the significance of
Bania partnership which they could hardly afford to ignore. Conse-
quently it was not surprising that they were prepared to give in to the
demands of the shroffs on the issues of discount and exchange which
were but peripheral concerns before their fundamental priority-that of
maintaining their establishment. This was particularly and more
acutely so in the ensuing decades when there was talk in London circles
about disbanding the entire Bombay settlement. Impatient with its
dismal and disappointing record, Lord Cornwallis in 1788 wrote to
49 It was
customaryforMuslimGeneralsto takewith thembankerswho undertook
all arrangements forration,pay and otheressentials.SeeBhargava,Indigenous
Banking,
pp. 29-3 I.
50 P.D.D. no.
73 of 1778, p. I35, Letter from Fort William dated i6 February 1778
and received by the Bombay Council on 20 March 1778; pp. I78ff, Letter from Fort
Williamdated 18 Februaryand receivedby Bombayon I April.
51 S.F.D. no.
672 of 1780, pp. 86, I I, I30-1.
52 S.F.D. no. 673 of I78I, p. 149, Letter from Fort William received by the Surat
Council on I July 178I.

Dundas expressing his scepticism about Bombay's future. 'What use',
wrote the Governor-General, 'was the parade of Governor and Council
and a large establishment of merchants and factors supported by all and
more than the surplus revenue ofBanaras and Bihar when they did little
more than load one ship a year and collect an insignificant revenue.'53
That the settlement did not in fact go under and emerged in just under
three decades as the political capital and leading commercial city of
Western India was largely owing to the timely interposition of
Indigenous cooperation and Imperial pursuits.
Consolidation of the Anglo-Bania Order
That brings us to the second phase in the workings of the Anglo-Bania

order between I780 and I8oo-when the implications of local credit
intervention became more pronounced and its ramifications more
extensive. Whereas the emergence of the Anglo-Bania partnership had
occurred in a period of languishing trade and depressed commercial
activity, its consolidation was carried out in conditions of resurgence
and revival of trade. The growing influence of the Bombay and Calcutta
trading complexes and their impact on the adjacent hinterland
economies reinforced credit connections permitting closer integration of
inland trading channels and accelerating the flow of credit transfers.
Bombay's trade with the Deccan and Poona which was impressive even
before I 770 became particularly so after and as Malet remarked, 'a state
of hostility with this empire very little affects the commercial intercourse
which must be attributed to its being in the interests of the farmers of the
customs and landholders not to impede the intercourse and as to the
latter it must certainly ever be our interest to promote it.'54 The trading
connection with the Northward, i.e. Gujarat, tended to be more
immediately significant and with the expansion of Bombay's trade with
China in raw cotton, the commercialization of the region's economy was
promoted with renewed vigour. These coincided with the emergence of
a further line of trade dependency tying the Eastern Maratha domains
to the Calcutta commercial pole. Increasing Bengal demand for raw
cotton was met by supplies from the Maratha cotton bearing tracts in
53
Quoted in Pamela Nightingale, Trade and Empire in Western India, 1784-1806
(Cambridge University Press, I970), pp. 46-7.
54
Quoted in C. A. Bayly, 'Political and Economic Networks in Eighteenth-Century
India', Paper prepared for the panel on '250 years of Agragarian Regimes in India', at
the American Association of Asian Studies Meetings, San Francisco, March 1983.

Central India like Amrauti and Nagpur through Mirzapur. Other

cross-country trade routes emerged as a result of redistributed tribute
relations that accommodated commodity exchange. The annual move-
ment of tribute payments from Baroda, Ahmedabad, Indore, Nagpur
and Gwalior to Poona working simultaneously with renewed piligrim
traffic under Maratha patronage generated a variety of opportunities
for merchant groups like the Banias who lost no time in moving into
these networks. The rise of the Benares banking families and others of
North Indian origin in addition to Gujarati Bania shroffs in the context
of the new and viable credit centres like Benares, Poona, Nasik, Nagpur,
Gwalior, Mirzapur and Aurangabad, to mention a few, demonstrated
the conditions of revival that parts of the Indian economy were
experiencing.55 Extension of credit and commercial channels inevitably
strengthened the position and bargaining powers of the Company's
financiers and consolidated the Anglo-Bania order that had by this time
become an integral feature of the contemporary political situation.
The politics of the Bombay Government remained until 1798 largely
desultory and confined to the policing of the seas and guarding against
the possible encroachments on their zones of influence by the Maratha
power along the coast and inland. These were years of preparation when
the Government came under the pressure of their merchant body which
advocated an interventionist policy largely to foster their commercial
concerns. The Government's immediate and pressing preoccupation,
however, remained the running of the establishment, maintaining its
political credential and financing the annual investments. Bombay's
financial crisis in any case precluded even idle contemplation of
ambitious schemes of conquest. Year after year, the Accountant-
General's statement indicated the Government's growing deficit: their
annual requirements fluctuating between Rs 20 and Rs 40 lakhs on an
average. These remittances had necessarily to be funnelled through the
existing credit system which by the eighties, as indicated, accommo-
dated a number of urban centres tied to Benares, the new and dynamic
financial capital of Eastern India, and Surat, which still retained its
influence as Western India's capital market. Accompanying this
development was the emergence of the Benares banking house of
Gopaldas Manohardas and their growing participation in the cotton
trade, in anticipating revenue assignments and offering remittance
facilities for Company and merchant. Other banking houses to engage
in similar activities were the Khatri firm ofLala Kashmiri Mal and the
55
Bayly, Rulers, Townsmenand Bazaars.

Surat banking family of Arjunji Nathji Tarvady. The involvement of
these large firms who very soon monopolized the remittance business of
the Company did not, however, entirely dislodge the smaller and
intermediary Gujarati bankers of Surat. On the contrary, there was a
closer inter-locking of the various levels of the credit market. Leaving the
business of large-scale money transfers to the bigger banking firms
mentioned, the city shroffs concentrated on arranging medium-scale
remittances to Bombay, issuing Hundis to the Surat factors against the
Benares remittance on their agents at Bombay, and capital contribu-
tions to the Surat agents of the Benares bankers who among other things
undertook on a contractual basis the supply of monthly advances to the
Bombay Government. Furthermore, the development of Bombay's
trade with China represented new business to them as they participated
in the trade in the capacity of both supply merchants, brokers and
bankers. Their small credit reserves in the 179os were, in fact, almost
entirely absorbed in the China trade, a fact commented upon by the
Bombay Council on several occasions.
The Benares Bankers and the English East India Company
A brief resume of the rise of the Benares banking house of Gopaldas

Manohardas will not be out of place here. Dr N. K. Sinha referred to this
important development in the general context of the proliferation of
indigenous banking enterprise in Eastern India in the second half of the
eighteenth century.56 The irretrievable decline of the house ofJagat
Seth had not caused a setback to indigenous banking enterprise. Small
and medium-sized sahukars and poddars engaged in advancing and
remitting funds for trade proceeds as well as land revenue payments
emerged and became 'masters of exchange from 1772 to 1792'-a period
of currency confusion and official bungling.57 The rise of the banking
house of Gopaldas Manohardas was part of this general development.
Beginning as small-time traders in the upcountry cotton trade, they
eventually consolidated their position as specialist remitters of revenue
for the local potentates and country powers not to speak of the E.E.I.C.
By I780, their skill and reputation was universally recognized enabling
them to establish a line of branch houses or agencies in Calcutta,
56
N. K. Sinha, The EconomicHistoryof Bengal,vol. III (Firma K. L. M. Calcutta,
I970).
57 N. K.
Sinha, TheEconomic
Historyof Bengal,vol. I (Firma K. L. M. Calcutta, 1965),
pp. 129-56.

Murshidabad, Patna, Gaya, Ghazipore, Mirzapur, Allahabad, Luck-

now, Bareilly, Jaipur, Nagpur, Surat, Bombay, Masulipatam, Madras,
Tanda, Phulpur, Poona and the Maratha army agencies at Agra, Delhi,
Ahmedabad and Baroda.58
From 1782 onwards, remittances from Fort William for all political
purposes came to be funnelled exclusively through the house of
Gopaldas Manohardas and from Surat through local bankers and their
agents. On 24 September I 782, the Surat factors received fourteen sets
of Hundis for Rs 634,525 with the firm of Gopaldas undertaking to pay
Rs 500,000.59 Exactly two months later, more bills were despatched
from Fort William for nearly Rs 15 lakhs with Gopaldas Manohardas
again taking the lead promising to pay Rs 800,000 and Arjunji Nathji
Tarvady the remainder.60 The Surat factors made prompt arrange-
ments for conveyance of funds realized to Bombay-the city shroffs were
contacted and they agreed to take charge of remitting small sums and
drew bills accordingly. Shroffs coming forward on this occasion like
Jeevan Tarachand, Laldas Vrandavandas, Javer Casidas, Navalram
Shivshankar, Tapidas Laldas, Vrabhucandas Tapidas, Balmukund
Narsidas, Pitambardas Chaturbhuj and a host of others were old citizens
of Surat with commercial interests in Gujarat as well as with Bombay
city proper. The following years were less encouraging when neither
remittances nor loans in the form of Bengal bills amounted to very much.
The city shroffs expressed their reluctance to take Bengal bills with the
result that there was an undue dependence on remittances from Bengal.
In 1786, Fort William remitted Rs I6,500oo,oooto the Bombay Govern-
ment through the houses of Arjunji Nathji Tarvady, Gopaldas Mano-
hardas, Lala Kashmiri Mal and Biseswar Beijnath.61 The Bengal
Council by now began to urge their subordinates in Bombay to tap local
supplies but to no avail. Capital was scarce and dear, and the shroffs
refused outright to come to any settlement except on terms thoroughly
disadvantageous to the Company. Their attitude left the Bombay
Government with little choice, and as they wrote to their superiors on 8
February 1788,
58 Calendar Persian
of Being letters referring mainly to affairs in Bengal
Correspondence.
which passed between some of the Company's servants and notables, vol. VII of 785-87
(Calcutta, I940), p. 326, Letters nos iI80 and 1192 dated 9 March 1787 from Babu
Manohardas.
59 S.F.D. no.
674 of 1782, p. 134, Letter enclosing bills of exchange received by the
Surat Council on 24 September 1782.
60 Ibid., p. I62, Letter and enclosures from Fort William received
by the Great
Council on 25 November I782.
61 S.F.D. no. 678 of 1786, pp. 103-4, 43 I-2, 452 for sets of bills received from Fort
William on 21 February, i September and 5 October respectively.

We are fully sensible that shroffson our side of India have taken advantage of
our pecuniary difficulties, but our exigencies have been such that we are
compelled to have recourse to them as our only alternative. It would afford us
great satisfaction to adopt the plan you have suggested in raising funds for our
resources by drafts from hence, instead of putting you to the necessity of
continuing your remittances to us from Benares. We are, however, helpless of
effecting it-there is no money procurable from bankers here.62
A clearer expression of the Government's dilemma could not have
been made as the apprehensions of the Bombay Government came to
pass. The very next day, they received word from the Surat factors that
hardly a lakh had been negotiated for at the rate of Surat Rs 92 per
Murshidabad Rs 0oo.63 The situation threatened to become worse with
the shroffs refusing to negotiate even at the rate of Surat Rs 90 per
Murshidabad Rs 0oo. Money was in short supply-the general decay in
trade with Bengal and the Gulfs was not yet offset by the China Trade
aggravating the situation. In their negotiations with the English Chief at
Surat, the shroffs pointed out that because of acute shortage of cash in
the city they had declined buying bills granted at Bombay under Surat
Rs go per Murshidabad Rs Ioo. Clearly the shroffs were working amidst
constraints and it was only the larger business houses involved in large-
scale remittance operations from Benares and Bengal to Surat who were
in a position to offer substantial help.64
The Council at Fort William soon came around to the Bombay
Council's arguments. The latter in their advices dated 17 April 1788
stressed the urgent necessity of remittance to pay the army and other
departments of Government.65 Even before receipt of these advices,
however, Fort William had empowered the Resident at Benares to remit
an adequate supply to the Bombay Government in bills 'at as short a
sight and as great an amount as shroffs would be disposed to grant
them'.66 Bills worth Rs 200,000 drawn on the house of Manohardas
Dwarkadas were received by the Surat Council. The Resident's letter
62
P.D.D. no. 92 A of 1788, p. Ioi, Letter addressed to Fort William on 8 February
1788 by the Bombay Government.
63
Ibid., p. 105, Letter from Surat dated 4 February and received by the Bombay
Council on 9 February 1788.
64
Ibid., p. 146, Letter from Surat dated 14 February 1788 and received by the
Bombay Council on 19 February. Also see pp. i55-6, Letter from Surat dated 22
February 1788 and received by the Bombay Council on 26 February 1788. S.F.D. no.
680 of 1788, p. 54, Consultation Meeting of the Surat Council of 21 February 1788.
65 P.D.D. no.
92 A of 1788, p. 264, Letter addressed to Fort William on 17 April 1788
by the Bombay Council.
66
Ibid., p. 266, Letter from Fort William dated 17 March 1788 and received by the
Bombay Council on 21 April 1788.

accompanying the bills noted that although the House of Bhyaram

Gopaldas had not agreed to draw the bills at a shorter rate than 61 days
after sight, his chief partner Manohardas Dwarkadas had reassured him
that bills would be discharged sooner than the date specified by his
brothers at Surat who had already been informed of the transaction.67
Remittances from Benares flowed regularly hereafter-by mid-May
nearly Rs 9 lakhs found their way into the treasury of the Bombay
Government and the Surat Council and from June to December
remittances amounted to Rs 19,00000 with bills drawn for the greater
part of Manohardas Dwarkadas and Arjunji Nathji.68 Other 'respect-
able shroffs' to quote the authorities assisting in the transaction were
Gopaldas Moolchand Dube, Hari Prasad, Ratanji Chovarji and
Ramkisan Malik. The following year saw remittances on an even larger
scale. The Company authorities were now openly appreciative of their
services and referred to them in glowing terms. There was a small flutter
in May 1789 when the Surat Chief found that three bills drawn on the
house of Gopaldas Manohardas had not been honoured. The Resident
at Benares dismissed the information as incredible, as he observed:
The House of the late Gopaldas stands too high in mercantile repute to admit
even of a doubt of its good credit. I am inclined to place much confidence in
what the partners have pleaded for their defence viz. non-acceptance by their
agents must have arisen from some unaccountable misapprehensionor direct
disobedience to orders.69
The Resident urged the Surat factors to look into the matter carefully as
it was greatly inexpedient for the Company to alienate the shroffs who
were 'of great resource to the Company'.70
The mystery was cleared in no time with the Surat factors apologizing
elaborately for their haste. A major omission in the Resident's letter
relating to the place of payment had resulted in the impasse. It was
certainly not a lapse on the part of the agents of the Benares bankers that
prompt payment had not followed. 'We had not the smallest reason', the
Surat factors confessed, 'to reflect on the conduct of men who have ever
evinced the strictest punctuality in all their transactions with the
Company well knowing that although bills were not accepted here, they
would not fail to be honoured at Bombay.'71
67
S.F.D. no. 680 of 1788, pp. 128-9, Letter from the Benares Resident dated 5 April
1788 and received by the Surat Council on 27 April 1788.
68
Ibid., pp. 170, 196, 24I, 252, 260, 292, 340, 467 and 484.
69
S.F.D. no. 681 of I789, pp. 29ff, Letter from the Resident at Benares dated 4June
1789 and received by the Surat Council on 22 July. 70 Ibid.
71
Ibid.,p. 349, Letter addressedto the Resident at Benaresby the Surat Council on 27
July 1789.

Thus by 1789, two identifiable strands in the Bombay and Bengal
Governments' financial transactions with the Bania bankers of Benares
and Surat had become perceptible. The bulk of the Bombay Govern-
ment's financial supplies was being channelled through the medium of
the Benares bankers and the Surat banking family of Arjunji Nathji.
Their local agents discounted and encashed the Hundis and relied for
this on their cash reserves. When these reserves threatened to run out
they dipped into the local money market, borrowing from the city shroffs
to make up the monthly advances of the Bombay Government. The
Surat bankers constituted the important middle level in the operating
credit and financial network. In July 1789 one important modification
was introduced in the procedure of financing the Bombay Government.
Arrangements for monthly supplies by contract were finalized. July
1789 saw the first of the annual contracts made by Government with the
house of Manohardas Dwarkadas. By this agreement, the latter's agent
at Bombay, Nagindas Golabdas, undertook to supply the Government
with Rs 40,000,000 over a period of twelve months in exchange for
Company bills on Bengal at the exchange of Bombay Rs 93 per Benares
Sicca Rs 0oo at fifty-one days' sight. The Company authorities on their
part promised not to use the services of any other banking firm for the
year covered by the loan. The Surat factors were accordingly instructed
on 6 August 1789 to receive into the treasury such sums as Nagindas'
agent at Surat tendered.72 The agreement, notwithstanding its appar-
ent advantages, was received with mixed feelings by the authorities at
Bengal and by the Resident at Benares who strongly urged their
colleagues at Bombay to keep their options open. The overbearing
importance of the local banking community seems to have disturbed the
Bengal Government at this stage as their terse and somewhat peremp-
tory summons to Bombay explicitly demonstrated.73 Necessity even-
tually outweighed these sentiments and contracts with the Benares
banking house of Manohardas Dwarkadas supplemented by agree-
ments with the Surat banker Arjunji Nathji became a regular and
integral feature of Bombay's financial arrangements.
72
P.D.D. no. 95 of 1789, p. 64, Letter addressed to Surat by the Bombay Council on 6
August 1789.
73
P.D.D. no. I 13 A of I 795, pp. 122-3, Letter from Fort William dated 28 April 1795
and received by the Bombay Council on 26 May I795. The Bombay Council was
directed to find a means to reduce the influence of the shroffs in determining the rate of
exchange.

Banias and the China Trade
If indigenous credit and assistance had helped sustain the running of the
Bombay establishment and enabled it to break even and exercise a
degree of control over coastal and Surat city politics, its validity was
even more pronounced in determining Bombay's commercial future
and fortune. Although the trade of the West Coast admittedly remained
unspectacular until the 1780s the beginnings of the China Trade held
out promising prospects for the future. Regular trading voyages to
China by the English East India Company and private merchants had
begun sometime in the I 77os from both Bombay and Calcutta largely in
response to two factors: increasing need of the E.E.I.C. for funds at
Canton with which to purchase cargoes of tea for London and the
inevitable problem of the private European merchants in remitting their
proceeds to Britain. The latter found it to their advantage to accept
Company bills which would be discounted at London at a reasonable
rate of exchange offering in return their funds to realize the Company's
annual investment of tea. The Calcutta and Bombay fleets stepped up
their activities in the mid I78os and carried into Canton raw cotton, tin,
pepper, and later opium-cotton at this stage constituting the staple
export item. The Company authorities, too, sent a couple of vessels to
China undertaking at the same time to provide tonnage to interested
merchants.
It was in I784-85 that the China trade of the Bombay merchants
began to show signs of considerable growth. An unprecedented increase
in the demand for raw cotton in the China market encouraged the
Bombay merchants to cash in. Bombay's customs from the trade
increased to Rs 2- lakhs annually between 787 and 1789 which placed
the value of trade between Rs 4 and 5 million.74 In 1790, the Bombay
merchants informed the Council that their trade was yielding to the
Company a revenue equal to all customs on other trades of the port.
Nearly Ioo,ooo bales of cotton were exported every year and for
purchases of which no less than Rs 40 lakhs were annually employed.75
74 P.D.D. no. A of
94 1789, pp. 85-93, Letter from the Cotton Merchants of Bombay
read at the Council Meeting of 24 February 1789. The Commutation Bill introduced by
Pitt in I784 reduced the duty on tea to 12 p.c. As a result, the company was able to price
its competitors out of the European market and its Chinese Trade leapt in value.
75 P.D.D. no.
96 of 1790, pp. 209ff, Petitionof the BombayMerchantsreadat the
Council Meeting of 23 March 1790. P.D.D. no. 104 of 1793, pp. 52ff, Consultation
Meeting of the Bombay Council of i March 1793. Exports from Gujarat estimated by
John Griffith of the Surat factory in 1785 averaged around 20,000 bales. In the I79os

In 1795, the Bombay Government reduced customs duties from 6 to 21
p.c.-the effects of which were dramatic.
The implications of the expanding China Trade were far-reaching.
For one, the Bombay establishment could at last provide a rationale for
its continued existence. Furthermore, the success of the Bombay
merchants affected the course of policy making in the official circles in
both London and Bombay precluding the possibility of winding up the
settlement. On the contrary, the merchants themselves to pursue their
trade interests became politically active and began to advocate an
expansionist policy to extend the Company's political influence in
Gujarat-the principal supply area of their export item, i.e. raw
cotton. 76
The Bombay merchants on their part worked in close contact with the
Bania traders and bankers for the vigorous prosecution of their trading
concerns. This arose from the nature and scope of Bania participation in
the cotton trade of Gujarat.
The staple export item of the China trade was raw cotton which was
grown extensively in Gujarat and Kathiawad. The best variety of cotton
was produced in the districts ofJambuser, Ahmood and throughout the
other parganas of Broach.77 Cotton was collected at the production
centres by petty dealers who undertook the cleaning of the cotton. It was
at this stage that frauds multiplied and the article was mixed with one of
an inferior sort or packed when only imperfectly cleaned. Cotton was
even on occasions adulterated with a mixture of salt and water doubly to
increase the weight. The dealers frequently took advantage of a season of
brisk demand to put into practice all their arts to adulterate the article
and thereby enhance the price. These dealers negotiated with the Bania
supply merchants who were generally agents of the Surat cotton
merchants with connections in Bombay. They normally undertook to
provide for the European merchants of the city and the Company. Their
close links with the dealers and markets up country enabled them to
improve their bargaining position and to gain recognition in Bombay's
commercial society.
The role of Bania finance and credit in the organization of the China
trade was even more striking. The Bombay merchant soon found himself
annual exports of raw cotton from Bombay were reckoned at 21.6 million pounds. See
Amalendu Guha, 'Raw Cotton of Western India. Output, Transportation and
marketing, I750-I850'. Indian Economicand Social History Review. vol. IX, no. I (1972),
pp. I-31.
76
Nightingale, Trade and Empire in WesternIndia.
77
For a contemporary report on the growth and cultivation of cotton in Gujarat, see
P.D.D. no. 4 of 1789, pp. I38ff.

up against two major constraints impeding his trading ventures and

which had to be effectively dealt with. He had in the first place to muster
and mobilize adequate funds to purchase cotton from the Bania
suppliers. This was not easy in view of the fact that they did not have
ready access to cash at all times of the year. Secondly, and this was even
more serious, the Bombay Rupee, the circulating medium in the island
city, was largely unacceptable outside city limits, not to speak of the
important cities of Gujarat from where cotton consignments were
expected to come. What this meant in effect was that not only had the
Bombay merchant limited access to mobile credit, he was also not in a
position to use his money to make purchases from outside. The
inevitable consequences of this were twofold. Firstly, the shroffs of
Bombay and Surat were approached to lend ready money at prevailing
rates of interest to enable purchases to be made. Secondly, the shroffs
were also approached to draw bills on their houses and agencies in Surat
and inland Gujarat. The Bania shroffs with extensive interests in the
cotton traffic had the means and credit to draw bills on their
correspondents at important market centres and towns like Broach and
Baroda where cotton consignments were assembled. The correspon-
dents encashed these Hundis, paying the stipulated amount to the
Bombay merchants or their agents to enable them to make their cotton
purchases. These bills became in effect the principal instrument in all
cotton purchase negotiations.78
The interplay of a variety of circumstances worked to the advantage
of the Bania financier enabling him to meet the essential requirements of
the Bombay merchants. The expansion of Bombay's cotton trade had
necessarily reactivated and extended the Bania-operated Hundi
network into inland Gujarat generating opportunities for brokerage and
remittance. Given the fact that the Bania merchants and shroffs had
always dominated the supply trade and its financing, it was not unusual
that they would be considered essential intermediaries by the exporting
merchants. Further, the shroffs were familiar with currency differences
and had long exercised the right to fix exchange rates between coins of
different denomination, and issue bills accordingly to the merchants
after appropriating a lucrative discount or Batta for themselves. The
Bombay merchant, on the other hand, had neither the requisite cash
78 Returns and
statements, External and Internal Commerce of I802-03, pp. 502-03.
This contains an exhaustive report on the want of a sufficient circulating medium to
answer the accumulated wants of an extensive commerce. Also see P.D.D. no. I 14 A of
I795, PP. Io9ff, Petition of the Bania Mahajan to the Surat Council dated 22 August
I795. The petition emphasized the Merchants' reliance on the shroffs' Hundis.

supplies to finance extensive purchases nor indeed the necessary
familiarity regarding the exchange ratio between the Bombay Rupee
which he owned and the Surat/Broach/Baroda/Jambuser Rupee that he
and his agents needed for purchases. Under the circumstances he
naturally preferred to strike a bargain with the Bania banker, to
persuade him to give bills for a fixed sum to be paid at Surat or elsewhere
rather than run the risk of what he might sell the debased currency of
Bombay for. The shroff issuing Hundis was familiar with two essen-
tials-how much of the Bombay coin would be realized at Surat, and
which in fact constituted the real difference of the value of the two coins,
and how much was to be added to this by way of expenses of conveyance,
insurance and profit. The net total of these items constituted the rate of
exchange between Surat and Bombay which the shroffs were in a
position to determine.79
From the very beginning, the Bombay merchant depended on the
Surat money market for the financing of his China ventures. The Banias
responded only too favourably to the growing demand for their Hundis
and brokerage services with the result that by the early 1790S of the
century, Hundis became the principal if not exclusive instrument of all
cotton purchases in Gujarat; approached by the European and Parsi
merchant firms of Bombay, the city Bania drew bills on his principal at
Surat and most often these were issued without receiving money
deposits. The bills were despatched to Surat, where on the strength of
these securities further bills were contracted for on their agencies at
Broach, Jambuser, Bhavanagar or wherever needed. The demand for
bills grew apace in the following years, fortifying the position of the
shroffs in the new trade system that Bombay's growth represented and
augmenting the rate of exchange between the Surat and Bombay Rupee
to the decided disadvantage of the Bombay merchants. At the turn of the
nineteenth century, the rate of exchange between the two Rupees
fluctuated between 8 and I2 p.c. against Bombay and was attributed
quite perceptibly by an author of a contemporary report to the general
scarcity of circulating specie in Bombay city and to the fact that it did
not enjoy extensive circulation outside, facilitating thereby the manipu-
lation and manoeuvre of the shroffs.80
Thus by the end of the eighteenth century, the Banias' role in
sustaining Bombay's trade and politics was explicit. Both Government
and merchant had come to rely fundamentally on local credit assistance
and cooperation to keep their ventures afloat, consolidate their position
79 Returns and Statements of 1802-03. 80 Ibid.

before initiating an extensive project of territorial conquest. Given the

precarious state of the Bombay establishment for the greater part of the
century, it is difficult to imagine how the Company authorities would
have maintained their establishments, controlled coastal and Surat city
politics and even embarked upon an expedition-albeit tentative and
limited in scope-against the Marathas, had it not been for the
sustained support and collaboration of the local Bania community. The
latter were by no means unaware of the importance the Company
attached to their cooperation or of the fact that they had emerged as an
identifiable power group in the newly emerging political and commer-
cial order under Bombay's direction. They capitalized on the situation
making full use of the opportunities inherent in it, and did not hesitate to
bring the attention of the E.E.I.C. authorities to their demands
whenever the occasion warranted it. The August Riots of 1795 in Surat
provided such an occasion when the Bania Mahajan protesting against
the city's lower orders who had rioted against the city's Bania
population,81 issued an elaborate petition to the Company authorities.
The petition outlined in very precise terms the pivotal position of the
Banias in the politics and trade of Bombay and threatened to withhold
their cooperation if security of their person and property were not
guaranteed. Extracts of the petition are worth quoting, highlighting as
they do the crucial role played by indigenous credit in the process of
Bombay's political and commercial expansion.
The necessity of this [i.e shroffs'] credit and of the aid of the shroffs to the
merchants is too well known to be dwelt upon. The time of the arrival of the
ships from China with merchandiseis precisely the time at which merchants of
Bombay must find means to make advances in actual cash for the provision of
their cotton to the Northward, and it is thereforethe time the most distressingto
them for actual resources-by means of the credit of the houses at Bombay, bills
are granted by the shroffs'shops there, on their houses at Surat and very often
without any money being paid in at the time-with these bills in hand, other
bills are negotiated at Broach,Jambuser, Bhavnagar which negotiation again
very much depends on the credit of the shroffs'houses at Surat with the houses
in these different places and this credit again depending on the belief of total
safety in every shape, the whole connection of the commercial system will be
destroyed without the visible protection of Government and instead of the
credit of the shroffs and the cheap conveyance of money by their bills, the
Bombay merchantsif they can raise it by the time which they generally cannot
must send specie at their own risk and expense.... Surat is indispensably
necessaryto the Company as a means of supplying Bombay with money for bills
on Bengal, about three-fourthsof the sum raised by contractorsfor this supply
81 Fora
studyof theSuratRiotsseeSubramanian,
'CapitalandCrowdin a Declining
AsianPortCity',pp. 205-37.

being raised by means ofshroffs and merchantsat Surat, for bills which the said
contractorsgrant on their agents at Kashi, Calcutta and other places to the said
shroffsfor money paid here and by the said contractorsremitted to Bombay.82
The message was clear. The Mahajan was baldly stating a fact that
neither the Bombay Government nor the merchants of the city could
ignore. It was the Banias' funds and credit transfer facilities that were
keeping afloat their ventures and had it not been for their sustained
support and cooperation during the crucial decades of transition, when
Bombay's very existence was in doubt, the establishment would
probably have been disbanded and the merchants deprived of the
opportunities for power and profit. Indeed, the emphasis on the politics
of the Bombay merchants as the motivating factor in the Company's
forward policy seems somewhat misplaced, and it appears worthwhile to
try and appraise the importance of the indigenous banking fraternity's
participation in Company politics and the impulses underlying it.83
Bania Finance, the Bombay Merchants and Company Success.

A Reappraisal
The turn of the nineteenth century witnessed the emergence of the

Bombay merchants as an active pressure group capable of influencing
the politics of the Bombay Government. Their advocacy of a more
forward policy in the region was in response to three clear-cut requisites
which they envisaged as essential for the success of their business
ventures. These were accessibility and availability of the export
commodity (raw cotton), a viable financial system to support the
financing of their trade, and uninterupted transportation on the high
seas. The existing political order along the West Coast did not offer any
of these guarantees; on the contrary, the Maratha occupation of the
greater part of Gujarat, incomplete control of Surat's administration by
the E.E.I.C. and the resumption of piratical activity by the Cooley
rovers and other semi-autonomous coastal chiefs rendered their ven-
tures exceedingly vulnerable. Sufficiently impressed by the merchants'
arguments the Bombay Government set the ball rolling in 800owhen
after the unexpected death of the Surat Nawab, they took the important
decision of taking over the entire government of the city.84 From Surat,
82 P.D.D. no. I 14 A of I795 pp. o09ff.
83
Nightingale, TradeandEmpirein WesternIndia.
84 S.F.D. no.
695 of 1795, pp. o02ff,Articles of Agreement between the English East
India Company and Nawab Nasiruddin and his heirs for the better administration of
Government of the city and its dependencies.

the thrust to the north was not long in coming-this fortuitously

coinciding with the Supreme Government's decision to break the
Maratha Confederacy. The outbreak of the second Anglo-Maratha
War (I802-06) came as the turning point: its conclusion yielding to the
Bombay Government decisive control over the mainland ofGujarat and
establishing its reputation as the supreme political arbiter of the region.
In contrast, the Company did not make much headway in coastal
politics in terms of territorial annexation or even decisive elimination of
piracy.
To what extent was Bombay's success at the turn of the nineteenth
century determined by indigenous assistance? The question is of some
relevance in view of the fact that the Bombay Government had during
peace-time been barely able to support itself without Bengal's surplus
transfers and Bania credit cum remittance facilities, and also because the
Company authorities had from the I79os begun to contemplate
alternative financing agencies to feed their treasury. These were sale of
Government promissory notes with interest at the rate of 6 p.c. per
annum, and public loans floated by the Government. These efforts to
bypass the shroffs were, however, not immediately successful with the
result that between 1795 and I800 the Benares contract and local
supplies from Surat continued to support the Bombay Government in a
major way. In 1796-97 nearly Rs 36,000,000 by contract with Gopaldas
Manohardas and Rs I0,000,000 from the Surat shroffs provided the
bulk of the Government's resources.85 The Fort William authorities
were by now beginning to feel the strain of answering drafts and urged
the Bombay Government to float a public loan at I2 p.c. Under the
terms proposed, the Government was to keep the loan open for a year
and the creditors to receive their principal along with an interest at 12
p.c. at the end of the year. This order given in 1797 was blissfully ignored
by their subordinates who argued that the proposed loan could not be
expected to yield more than Rs 0,000,000, leaving an unprovided
residue of Rs 20,000,000 which would reduce their investments in
Gujarat and Malabar.86 They had their way eventually with the result
that the Benares contract and local funds continued to provide for their
mounting expenses. Between January and September I799, nearly Rs
40 lakhs were borrowed by the Bombay Government from the Benares
and Surat bankers (see Table I).
85 P.D.D. no. I of
19 1796, pp. 364-5, Letter from Fort William dated I I July 1796
and read by the Bombay Council on I I August 1796.
86
P.D.D. no. 134 of 1798, p. 213, Letter addressed to Fort William on 27 July 1798.

TABLE I
Loans to Bombay Government,January-Sep-
temberi799
Date Received Drawn from Amount
8 January Surat Rs 53,000

8 February Poona Rs 50,000
8 March Surat Rs 53,000
29 March Surat Rs I04,000
9 April Surat Rs 53,000
I2 April Surat Rs 75,000
19 April Surat Rs 53,000
I4 May Surat Rs 280,000
6 June Surat Rs I47,000
13 August Surat Rs 300,000
I6 August Surat Rs 75,000
Note: the above was in addition to the contract

with Manohardas Dwarkadas, Gopaldas
Manohardas and ArjunjiNathji Tarvady for a
monthly supply of Rs 236,ooo000.
Source: Public Department Diaries of the
Bombay Government, Relevant files.
The concern among official circles to develop alternative financing

agencies did not, in fact, immediately make a dent in the operations of
the Bania shroffs. On the other hand, substitutes contemplated by the
Government were largely in the nature of additional supplies in a
situation whose pressures were becoming too severe for the bankers.
Even in 1803, when an important agreement was concluded between
the Bombay Government and the leading merchant houses of the city-
Forbes and Co., Fawcett and Co. (by which the latter agreed to deposit
in the Government Treasury a stipulated sum to be repaid within a
year), transactions with the shroffs continued on an extensive scale
amounting to Rs 56 lakhs in exchange of Bengal and Benares bills.87
There was clearly no question, as yet, of bypassing the agency of the
shroffs despite Government intervention to that effect. The latter not
merely undertook the responsibility of transferring funds for the use of
Company forces but also urged them in Surat in I800 to take over
complete control of the city administration.
The pressures of the military campaign during the years of the Anglo-
Maratha War increased predictably the expenses of the Government.
87
P.D.D. no. 172 of I803, p. 278, Letter from Court of Directors dated 4 February
1803 read in the Council Meeting of I I June 1803.

On 9 February I904, the Fort William authorities provided their

subordinates with a detailed set ofinstructions. They promised to supply
them with bullion valued at 29 lakhs and agreed to answer bankers'
drafts to the amount of Rs 50 lakhs per annum. For expenses beyond
this, the Bombay Council was to rely on a public loan.88 The
Government was not very enthusiastic about the loan, and it was on the
shroffs and later the Agency houses that the onus fell. Tenders from the
shroffs continued as ever to sustain the Government's expenses, but it
was becoming increasingly clear that they, too, were functioning amidst
constraints. Their loans, although considerable, were proving inade-
quate to support the Company's wars, added to the fact that a good
portion of this specie was absorbed in the China Trade. The inevitable
outcome of this was that the Government was compelled to borrow at
very unfavourable exchange rates from the house of Manohardas
Dwarkadas alone, there being no competition in the market. Alternative
solutions were sought, this coming in the form of the Northern Loan of
1804 that the Company contracted with the Agency houses of Bombay.
By this agreement, the Company promised to make over their intended
provision of cotton for the current year, i.e. 1804, to the Agency houses
who in return agreed to pay freight charges for cotton at the rate ofRs 30
per ton together with the net proceeds thereof into the Company
treasury at Canton for bills on the Court of Directors and to pay into the
Bombay treasury on or before 31 May I804, a sum of Rs Io lakhs.89
The Northern loan was undoubtedly a transaction of major signifi-
cance. It filled a vital gap in the Company's deficit and enabled them to
conduct their military operations vigorously and successfully. It
indicated at the same time the growing influence of the city's merchant
houses, who had intervened in favour of the Government for the first
time. Hereafter it could be expected that the Government would try and
restrain the influence of the shroffs and develop a viable financing
system. To quote Duncan's views on the occasion, 'You must be sensible
of the great assistance afforded by Messrs. Forbes and Co., Fawcett and
Co., during the period of our pecuniary difficulties ... had these
resources been carried over to the other side and united with the shroffs
in lowering the exchange and depreciating the Company's paper, our
situation should have been desperate.'90
Duncan's eulogy on the services of the merchant firms did not,
however, impress the Fort William authorities, nor indeed did the
88
P.D.D. no. 183 of I804, pp. 4i6ff, Letter from Fort William dated 9 February and
received by the Bombay Government on 9 March I804.
89 90 Ibid.
P.D.D. no. 20o A of 1805, pp. 313-32.

Northern loan deflate the importance of the shroffs' assistance during
the years of conflict. The latter's advances continued at a substantial
level-Rs 42 lakhs per annum in exchange of Bengal and Benares bills, a
point that the Bombay Government reluctantly conceded to their
superiors. The latter urged them to introduce, and put into operation, a
public loan bearing an interest of 8 or o p.c. with an added provision for
transfer of promissory notes to Bengal at 2 p.c. above the exchange rate.
The Bombay Council argued that the introduction of such a loan was
unnecessary and would not yield substantial dividends and that the
financial cooperation of the Bombay merchants was essential to
complement the assistance of the local shroffs. The latter's contribution
to the successful running of the war effort had been decisive-their cash
reserves had constituted the bulk of the Government's resources and
their credit connections the principal artery through which money had
moved to the dispersed and scattered theatres of war. Fort William
remained unconvinced and the loan went into effect, and subscriptions
remained predictably low. Indeed, it was the agreement concluded with
Arjunji Nathji Tarvady and his agents in Gwalior, Ujjain, Baroda and
Indore that remained the life-line of the Bombay armies.91
The end of the war, however, brought about a perceptible alteration
in the equations of the Bania-British alliance. The interruption to
inland trade caused by the prolonged state of hostilities disrupted the
credit exchange network connecting Western India and the Deccan
with Central India and Benares and dislocated the business of the
Gujarati Bania shroffs. This coincided with the success of the Bombay
Government whose financial position after the war was considerably
stronger. Territorial acquisitions in Gujarat guaranteed the Company
authorities a permanent source of revenue and the Bombay merchants
greater access to supply areas. The expansion of the latter's China Trade
had important consequences for the Company. Increasing revenues
from Customs on the trade was one. Expanding trade also relieved
conditions of specie scarcity in the city and augmented the necessity of
remitting funds to Bengal and profits and proceeds of trade to London
and Canton through the agency of the Company. The latter was, in
other words, taking over to a limited extent the business and channels of
remittance hitherto almost exclusively controlled by the shroffs and
thereby tiding over its pecuniary requirements. Subscriptions to public
loans after 1807 increased rapidly; when the 1808 loan was closed in the
91 Board's Collections
(IOL) F/4/269, 5907-i8, vol. 269 of I809-10, copy of
agreement between the English East India Company and Tarvady Arjunji (extract of a
military letter from Bombay dated 22 February I806).

5Io LAKSHMI SUBRAMANIAN
following year, subscriptions to the tune of Rs 72 lakhs had been raised.

The sketch estimate of the government's expenses for the ensuing year
stated that Rs 92,000,000 would be raised from loans and Rs 40,000,000
from drafts on the Court.92 The fifty-year-old connection of the
Company with the Bania bankers had clearly ended.
The emergence of Bombay as the political capital and the leading
commercial city of the West Coast was by I 8 IOan accomplished reality.
The struggling settlement had after half a century of conciliation and
confrontation effectively challenged the mighty Maratha Confederacy
and taken over the leadership of the region. The achievement was by no
means inconsiderable given the chronic shortage of funds and resources
that the Government had to cope with for the greater part of the
century. That it had materialized at all was due largely, if not entirely,
to the sustained support that the Company had succeeded in mobilizing
from the Banias. If the European merchants of Bombay city had
provided the ideological rationale behind expansion, it was Bania
capital that fed the fighting armies, clothed the men locked in battle and
kept them in good humour. The Banias struggling against severe odds in
the wake of the so-called eighteenth-century crisis had astutely
recognized the advantages of the Company connection which, as it
turned out, had not merely enabled them to stabilize their waning trade
but also generated a new range of opportunities. The pressures of the
fluid political situation with its attendant requirements made it possible
for them to assume a position of central importance in the financial
strategy devised by the English East India Company authorities to
realize their projects. This encouraged them to support Company
expansion at the expense of native powers, particularly the Marathas.
The Company's policy of protection of the 'fair trader' yielded evident
results: whether it was in Bombay or in Benares or in Hyderabad, it was
the same story of local merchants and sahukars pinning their hopes on
the Company connection and using it to back its programme of forward
expansion. The sentiment was probably best expressed by Tarvady
Shankar, one of the victims of the Surat Riots of I795, 'I have seen
Benares, the people are all happy there under the English Government.
Nowhere have I seen such a thing happen where you English are.'93
92
P.D.D. no. 261 A of 1809, pp. 2off, Letter from Fort William read by the Bombay
Council on 9 January 1809. pp. 48ff, Letter from the Accountant-General received by
the Bombay Council on 27 January i809.
93 P.D.D. no. II5 A of 1795, pp. 6Iff,
Report of the Enquiry Committee and
declaration of Tarvady Shankar.


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Banias and the British: The Role of Indigenous Credit in the Process of Imperial Expansion in

Western India in the Second Half of the Eighteenth Century

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Banias and the British: the Role of

Visva Bharati, Santiniketan

THE pressing preoccupation of the British administration in the early

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Structure, Resources and Functions of the Bania Community

Some preliminary observations on the Bania community of Western

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The influence of the Gujarati Bania community of Western India as

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ways. The expansion of Gujarat's overseas trade coming in the wake of

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Merchants, administrators and Companies made extensive and regular

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purchases and loan transactions. They had their network of constituents

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RAS BANIA CREDIT

MAIN CREDIT CENTRES *

Map 1. Credit lines in late eighteenth-century India.

Map I. Credit lines in late eighteenth-century India.

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The Crisis of the Eighteenth Century and the Bania Response

The role of local collaboration in the developing Imperial strategy of the

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substantive privileges which would henceforth enable the Company to

The Emergence of the Anglo-Bania Order-Origins and Ante-

While the Castle Revolution of 1759 and the systematic infiltration of

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change when in their efforts to extend Bombay's maritime hinterland

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Bengal remittances was conveyed through the medium of the Angras

36 P.D.D. no. 5o(I) of 1768,

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merchants and shroffs taking advantage of the difficulties we lay at times

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stances, the Hundis of the Bania shroffs assumed vital importance.49

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Consolidation of the Anglo-Bania Order

That brings us to the second phase in the workings of the Anglo-Bania

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Central India like Amrauti and Nagpur through Mirzapur. Other

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The Benares Bankers and the English East India Company

A brief resume of the rise of the Benares banking house of Gopaldas

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Murshidabad, Patna, Gaya, Ghazipore, Mirzapur, Allahabad, Luck-

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accompanying the bills noted that although the House of Bhyaram

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