Tracking banking-textiles ties from 17th century
The ships that carried gold used to take more than six months or more to reach
By : k.t.p. radhika
Update: 2015-08-13 06:32 GMT
Chennai: Banking and textiles are quite an unlikely pair. But in Chennai, they share a strong thread of friendship, which dates back to the early 17th century, according to historian V. Sriram. The city’s undying appetite for good quality textile and clothes marked the beginning of industrial business here, initiating financial transactions and banking, said Sriram talking about ‘Early Banking in Chennai’ to employees of the Reserve Bank of India in the city, as part of the celebrations marking 376 years of Madras.
The British came to the city in 1639 to buy quality thick cotton clothes, which were only available in this part of the world. To fund this business, they have to pay weavers and for which gold had to be shipped from England. To communicate and to manage the weavers’ payments, the East India Company also appointed local agents who were known as dwibhasishs or dubash, said Sriram. In a matter of time, most dubashs got very rich.
The ships that carried gold used to take more than six months or more to reach. During this period, the dubashs also used to lend money to East India Company at a very high rate of interest and became early bankers of Madras Sriram said , hearing which employees burst into laughter.
In the 18th century, businesses like textiles and sugar bloomed in the city. In 1786, Thomas Parry, a Welsh merchant, came to Chennai and started EID Parry, which is a famous sugar company today. Later in 1799, John Binny, another British business man, came to the city and started Binny and Company. They too became suitably rich and started banking services. And the biggest business house of them all was Arbuthnot & Co with whom all the major companies, doctors, judges and other famous personalities of that time banked. It was operating form Fort St. Geroge. It also loaned money to the Nawab of Arcot who was the owner of the entire city then.
These companies which used to be operated from Fort St Geroge, later moved to Rajaji Salai. Parry was the first company to start an office there. Slowly, all the British offices came here and the area became first business district of the city.
In 1843, the Bank of Madras started functioning , which was funded by major companies to exclusively fund British business activities. The Government of Madras also invested in this bank. This bank later became the first official bank for the Madras Presidency. That said, Indians were not allowed to bank here. In 1853, the National Bank and after 10 years Charted bank of India Australia and China were formed. In 1893 came the Mercentile Bank. In the last quarter of 1906, Madras was hit by the worst financial crisis the city was ever to suffer. Of the three best British bankers which was the soundest of the three Arbuthnot bank crashed.
Many famous personalities including painter Raja Ravi Varma invested all their money in this bank. The famous St. Peters College in Thanjavur shut shop because its money was invested in Arbuthnot Bank. Sir George Gough Arbuthnot partner of the bank was arrested.
As a cascading effect other two companies also faced problems. Binny was sold to the investor in England and Parry was forced initiated a loan with an British company and published their balance sheets in newspaper. A key figure in the case Madras lawyer, V. Krishnaswamy Iyer, who fought for the investors of Arbuthnot later organised a group of Chettiars, which founded Indian Bank in 1907. Later they bought the property of Arbuthnot. After the success of Indian Bank, many Indians started banks namely Karur Vysya Bank in 1915, Indian Oversees Bank in 1937. In 1935 the central bank RBI came into existence in Chennai.