Question

Discuss the development of indigenous banking system in indian subcontinent
In points for 3 marks question

Answer 1

Answer

The country was often referred to as ‘Swaranbhumi’ and ‘Swarndweep’ in the writings of many travellers, such as Megasthenes, Faxian (Fa Hien), Xuanzang etc. The pre-colonial period in Indian history was an age of prosperity. Indigenous banking system played a prominent role in lending money and financing domestic and foreign trade with currency and letter of credit. With the development of banking, people began to deposit precious metals with lending individuals functioning as bankers or Seths, and money became an instrument for supplying manufacturers with a means of producing more goods. Documents such as Hundi and Chitti were in use for carrying out transactions in which money passed from hand to hand. In ancient India, Intermediaries played a prominent role in the promotion of trade. They provided considerable financial security to the manufacturers by assuming responsibility for the risks involved, especially in foreign trade. The institution of Jagat Seths also developed and exercised great influence during the Mughal period and the days of the East India Company. The emergence of credit transactions and the availability of loans and advances enhanced commercial operations. The Indian subcontinent enjoyed the fruits of a favourable balance of trade, where exports exceeded imports with large margins and the indigenous banking system benefitted the manufacturers, traders and merchants with additional capital funds for expansion and development. Between the 1st and the 7th centuries CE, India is estimated to have the largest economy of the ancient and medieval world, controlling about one third and one-fourth of the world’s wealth. Transport by land and water was popular in ancient times. Trade was maintained by both land and sea. Maritime trade was another important branch of the global trade network. The Europeans embark great voyage of discovery. Even the guild merchants also played an important role and developed many trade centres such as Taxila, Pataliputra, and Mathura etc.

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