In India the reserve must be unusually large, first, because India is a great country specially liable to wide fluctuations in her prosperity and trade on account of climatic conditions the character of which cannot be easily foreseen; and second, because a large amount of foreign capital is employed, not only in permanent investment, but in temporary loans withdrawable at short notice, and because against these foreign liabilities India holds no appreciable amount of international Stock Exchange securities capable of easy realisation. _—Gold is slowly but steadily replacing currency notes.
They carry from home the idea and the habit of banking, and they take to it as soon as they can in their new world. 5. , or nearly 1/3 rd of their capital, principally out of undivided profits. On the present occasion 45,000,000 L. ” But on more than one occasion the Banks made difficulties when the Government desired to withdraw large sums at short notice.
First, in order that it may always be possible to fulfil this obligation, it is necessary to keep a certain reserve of coined rupees, just as some authority in this country—in point of fact the Bank of England—must keep some reserve of token silver and coined sovereigns and not hold in its vaults too large a proportion of uncoined or foreign gold. Take, for example an account, which may be considered an average specimen of those of the last few years–that for the last week of 1869: _An account pursuant to the Act 7th and 8th Victoria, cap. ; for experience shows that between 2,000,000 L. ‘ This is not indeed a direct withdrawal of money on deposit, but its principal effect is identical. A busy season will soon come when the Government might lend some part of its reserves in India without endangering in the least the stability of its system and to the great advantage of Indian trade. The first instinct of everyone is the contrary. On current accounts 2 per cent is generally allowed, though the eagerness of some of the newest Banks has led them to offer 2½. 1899. The system still wants elasticity.
This is what is meant by saying that a long established and rich bank has a ‘privileged opportunity’; it is in a better position to do its business than any one else is; it has a great advantage over old competitors and an overwhelming superiority over new comers. There being a large demand on a fund which you want to preserve, the most obvious way to preserve it is to hoard it–to get in as much as you can, and to let nothing go out which you can help. A note issue is mainly begun by loans; there are then no deposits to be paid. If they permit all other forms of credit to perish, their own will perish immediately, and in consequence. The Government is necessarily at times possessed of large sums in cash. The German Government has recently been so kind; it was in no respect afraid. │ 1907–1908. No new private bank is founded in England because men of first-rate wealth will not found one, and men not of absolutely first-rate wealth cannot.