The Exchange Banks proper fall into two groups—those doing a considerable proportion of their total business in India, and those which are no more than agencies of large banking corporations doing business all over Asia. His capital can bear only a limited number of purchases; if he bought as much as would fill his time from day to day he would soon be ruined, for he could not pay for it.
That is as much a part of its daily stock-in-trade as its desks or offices; or at any rate, whatever words we may choose to use, we must carefully distinguish between this cash in the till which is wanted every day, and the safety-fund, as we may call it, the special reserve held by the bank to meet extraordinary and unfrequent demands. No doubt all precautions may, in the end, be unavailing. The phenomenon under discussion is in no way peculiar to India and does not arise out of those features of the Indian system which are characteristic of a Gold–Exchange Standard.
The relative importance of notes and rupees in supplying the seasonal needs of trade is well shown in the following table:— NET ABSORPTION (IN LAKHS OF RUPEES) OF CURRENCY INTO CIRCULATION (+) OR RETURN OF CURRENCY FROM CIRCULATION (–).