Prices have been rising, as it is, much faster than is healthy and in a way very disadvantageous to such a creditor nation as Great Britain, to whom large sums fixed in terms of gold are annually due. . Officially a Bank is an Exchange Bank if its head office is located elsewhere than in India; but Banks in this category coincide very nearly with Banks doing the class of business described above. To pay what was necessary the ‘Gurneys’ had to sell their estates, and their visible ruin destroyed the credit of the concern. These figures reveal, in my opinion, an exceedingly serious state of affairs. In 1825, the entire concern almost suspended payment; in 1797, it actually did so. ).
Ordinarily, however, there is no account of which the course can be so easily predicted; and therefore no account which needs in ordinary times so little reserve. This would not be the case, I believe, in the busy season, so much as in the slack season, when the Banks do not let their published rates fall below 3 per cent, although money may be practically unusable and they would probably be glad enough to lend a large sum at 2 per cent. 16. Weguelin, who was then Governor of the Bank, to Sir George Lewis, who was then Chancellor of the Exchequer. A more miserable catalogue than that of the failures of the Bank of England to keep a good banking reserve in all the seasons of trouble between 1825 and 1857 is scarcely to be found in history. At the same time (1893) the Notification of 1868 was superseded by a new Notification fixing fifteen rupees as the rate at which sovereigns would be accepted at Government Treasuries; and a Notification was issued under the Paper Currency Act of 1882, directing the issue of currency notes in exchange for gold at the Rs.
In the meantime I pass to a description of the Paper Currency as it now is—insisting, however, that when we come to consider how it may be improved, the circumstances of its origin be not forgotten.
They advance on foreign stocks, as the phrase is, with ‘a margin;’ that is, they find eighty per cent of the money, and the nominal lender finds the rest. On the other hand, the estimates of the Government of India of gold available for coinage in that country are less than was anticipated, nor is any considerable increase expected, at any rate for some time. As our issue of Exchequer Bills would have been useless unless the Bank cashed them, as therefore the intervention of the Bank was in any event absolutely necessary, and as its intervention would be chiefly useful by the effect which it would have in increasing the circulating medium, we advised the Bank to take the whole affair into their own hands at once, to issue their notes on the security of goods, instead of issuing them on Exchequer Bills, such bills being themselves issued on that security. If the use for the additional currency is only temporary, the cost of transport or remittance is great enough to make it not worth their while to get this addition until the Indian rate of discount has been forced up to a high level.