They accordingly accumulated a large deposit at the Bank to the amount of 3,000,000 L. At the same time (1893) the Notification of 1868 was superseded by a new Notification fixing fifteen rupees as the rate at which sovereigns would be accepted at Government Treasuries; and a Notification was issued under the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 1866 we held only a much smaller sum of foreign money, but that smaller sum was demanded and we had to pay it at great cost and suffering, and it would be far worse if we had to pay the greater sums we now hold, without better resources than we had then. From 1892 to 1899 loans were made very rarely. The principles which underlie the preceding analysis may be illustrated by reference to a hypothetical balance sheet, simplified, but less simplified than those commonly published. New Banks are springing up with alarming rapidity, with little share capital subscribed; these Banks are trading on the confidence of the depositor who is little versed in money matters but is attracted by the name “Bank” and wishes to earn interest on his savings. Only in 1792, after nearly thirty years, it began to gain deposits, but from that time they augmented very rapidly. The use of credit is, that it enables debtors to use a certain part of the money their creditors have lent them. And if No. After establishing with difficulty a gold standard, they began with the theory, and have since abandoned it, that a gold currency was the natural corollary. I do not imagine that it would touch the Issue Department. And all the rest of the knowledge requisite for a banker can easily be obtained by anyone who has the sort of mind which takes to it. I think the £40,000,000, which I have fixed as the maximum figure of what is required for the redemption in sterling of such notes and rupees as may be presented, is more than sufficient to meet the adverse balance that is at all likely to emerge in any single year. and deposits 8,000,000 L. So far as the Government of India is concerned, questions of finance and currency are in the hands of intelligent amateurs who begin with the timidity of ignorance and leave off just when they are becoming properly secure of their ground. The account of ‘public deposits’ in the Bank return includes other accounts too, as the Savings’ Bank balance, the Chancery Funds account, and others; and in consequence, till lately the public had but little knowledge of the real changes of the account of our Government, properly so called.
The origin of the Bank of England has been told by Macaulay, and it is never wise for an ordinary writer to tell again what he has told so much better. If we pass from France, whose position as a creditor country is not altogether unlike Great Britain’s, and from Germany, which is at any rate able to do a good deal towards righting the balance of immediate indebtedness by the sale of securities having an international market, to other countries of less financial strength, we find the dependence of their Central Banks on holdings of foreign bills and on foreign credits, their willingness to permit a premium on gold, and the inadequacy of their bank rates taken by themselves, to be increasingly marked.