I shall return to this proposal again in Chapters VI.
Let me first give a short account of the nature of the seasonal demand for money in India; and then discuss the salient respects in which her system of note issue differs from those of typical note–using countries. Apart from Notifications, an Act of 1899 declared British sovereigns legal tender at the Rs. The interest thus accruing on the invested portion of the reserve, less the expenses of the Paper Currency Department, is credited to the general revenues of the Government under the head “Profits of Note Circulation. I will conclude this chapter with a brief history in outline of the Gold–Exchange Standard itself. The _hoondees_ they purchase are for the most part those of traders, small and large, at rates of discount ranging from 9 to 25 per cent per annum, but the _hoondees_ they buy and sell to each other, which are chiefly the traders’ _hoondees_ bearing the Shroffs’ own endorsements, rule the rates in the native bazaar, and are generally negotiated, during the busy season, at from 5 to 8 per cent discount. But still there is a faith in the Bank, contrary to experience, and despising evidence. │ N.  In an intermediate position comes Germany—a creditor in relation to many of her neighbours, but apt to be a debtor in relation to France, Great Britain, and the United States. per rupee higher than the rate for bills. 36. will be kept in the till.
And what is more, the Bank directors are not trained bankers; they were not bred to the trade, and do not in general give the main power of their minds to it. . │. From the currencies of these it is an easy step to those of the great trading nations of Asia—India, Japan, and the Dutch East Indies.
Such accidental events are of the most various nature: a bad harvest, an apprehension of foreign invasion, the sudden failure of a great firm which everybody trusted, and many other similar events, have all caused a sudden demand for cash. It is in this respect that the more substantial of these Banks are chiefly open to criticism. Again, on one recent occasion, it was stated that more gold would have been shipped if it had not been for the fact that the mail–boat was already carrying a million and a half sterling in gold and silver, the underwriters requiring a higher premium than usual if they were to insure a larger sum than this on a single voyage.
But to establish a note circulation, a large number of persons need only do nothing.  10. By far the greater part of the bargains of the country in moneyed securities is settled on the Stock Exchange twice a month, and the number of securities then given up for mere cheques, and the number of cheques then passing at the Clearing-house are enormous.
If telegraphic exchange were fixed at 1s.
Gold reserves, therefore, in Great Britain are no longer held primarily with a view to emergencies of this kind. It might be a real convenience if Government notified its readiness to purchase bars tendered in India at Rs.