The process is this: the plentifulness of loanable capital causes a rise of prices; that rise of prices makes it necessary to have more loanable capital to carry on the same trade.  Since 1906 numerous Banks have been started, amongst the most important of which in respect of paid–up capital may be mentioned the Bengal National Bank (1907), the Bombay Merchants’ Bank (1909), the Credit Bank of India (1909), the Kathiawar and Ahmedabad Banking Corporation (1910), and the Central Bank of India (1911). Other expenses were of a very small amount. 37. And in the second place, the Secretary of State’s method of selling exchange results in his dealing exclusively with the Exchange Banks and financial houses, and not directly with the trading public.
It will be useful to know in what way this method has grown up. It is not yet clear, however, that their present amount is normal. And by neither of these was any real bank (I do not count absurd schemes such as Chamberlayne’s Land Bank) permitted with limited liability in England till within these few years. Yet for the reasons already given it would not be worth while in existing circumstances for any one to borrow this sum and remit it to London, until such time as it may be again wanted in Calcutta;—it is better to let it lie idle and wait for busier times. 10. But this policy had no effect, except that of exciting a distrust of ‘Overends’: the credit of the Bank of England was not diminished; Overends had to return the money in a few days, and had the dissatisfaction of feeling that they had in vain attempted to assail the solid basis of everyone’s credit, and that everyone disliked them for doing so. Experience accords with these expectations. ‘Are not both sets of bills by this means under discount?–No, the bills received from one part of the country are sent down to another part for discount.
But how were those bills to be paid? Some one else must lend the money to pay them. ‘It is interesting to compare the facts of joint stock banking with the fears of it which were felt. Very few selections in the world are made with nearly equal purity. 21. 3–15/16d. All which the best board of directors can really accomplish, is to form a good decision on the points which the manager presents to them, and perhaps on a few others which one or two zealous members of their body may select for discussion.
An objection is also taken to the large number of Bank directors. But, however all this might be, at present the Government of India do _not_, in fact, exert such discretionary powers as they possess for affecting, even temporarily, the volume of circulation. each, and that is our English banking. In what follows, therefore, I shall leave these five Banks out of account. 13. This deduction is in accordance with the practice of the reports of the Currency Department.
A ring of speculators lay waiting to force prices up as soon as the Government should appear as a buyer. Normally, of course, an Australian bank is able to get more than 1s.