Banking was frequently an extension of a merchant family's economic life in traditional Hindu culture, especially in periods and locations when centralized banking did not exist.
The majority of these families conducted business using hundis, or letters of credit, which allowed them to do commerce across long distances without the danger of transferring gold and silver bullion.
- These hundis had become virtual money in most of India by the early 1800s, since they were sometimes used in twenty or thirty transactions before being returned to the issuing family for cashing.
- The creditworthiness of a merchant family became its most precious asset under this arrangement.
- The family's hundis were no longer respected once this was gone, and they were unable to do commerce.
Because a family's credit was frequently based on assumptions about its character, merchant families worked hard to project an image of seriousness, reliability, and thrift.
- The only place where extravagant spending was allowed in this culture was for religious endowments, which bolstered the family's devout image and therefore increased their creditworthiness.
- These families would typically invest some of their excess cash in moneylending as a means to enhance their fortune; the wealthiest families regularly loaned money to royalty, which gave them even more prestige.
C. A. Bayly's Rulers, Townsmen, and Bazaars, 1983, is a superb depiction of the merchant family culture in northern India.
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