THE SILVER STANDARD AND THE DISLOCATION OF ITS PARITY 395
for panics. Evils such as these would have in any other country compelled the authorities to take proper steps to deal with them. But it is a curious fact that in India no serious attempts were made to alleviate the sufferings they inflicted upon the trading community. A reform of the paper currency or the abolition of the Independent Treasury System would have eased the situation, though a reform of both would have been better. The general community, however, was not desirous for a change of the paper currency,* but was anxious for the abolition of the Independent Treasury. The Government, on the other hand, refused to do away with its Independent Treasury System,† and repudiated even its moral obligation to help the business
- Cf. India in 1880, by Sir Richard Temple, p. 469 ; Sir Charles Wood’s Administration of Indian Affairs, p. 89 ; also The Indian Statesman, January 15 (1884).
†It should, however, be noted that between 1862 and 1876, at some centres comprising the head offices and branch offices of the Presidency banks, the Independent Treasury System was suspended. By way of compensation for the loss of their right of note issue, the Presidency banks were given certain concession by the Government under agreements entered into in accordance with Act XXIV of 1861. Among the concessions one was the use by the banks of Government balances. The first agreement, that of
1862, conceded to the banks the following privileges in regard to the Government balances : (1) The unrestricted use for banking purposes “ of all moneys and balances which but for the agreement would have been received or held at the General Treasury “ up to the limit of 70 lakhs in the case of the Bank of Bengal, 40 lakhs in the case of the Bank of Bombay, and 15 lakhs in the case of the Bank of Madras. (2) The option of setting aside the excess over these sums in a separate strong room for production when demanded, or of investing it in Government paper or other authorized securities, the power of investment being subject to the condition that the banks should be “at all times answerable and accountable to Government for the surplus cash balance for the time being.” (3) The right to interest from Government on the difference between the actual balance and 50 lakhs in the case of the Bank of Bengal, 30 lakhs in the case of the Bank of Bombay, and 10 lakhs in the case of the Bank of Madras, whenever the balances at these banks fell below these minima. (4) Permission to the banks to use the Government balances at their branches on similar terms, suitable limits being fixed in each case, as in the head office agreements.
A year after the agreements were executed, difficulties arose with the Bank of Bengal, which had locked up the funds to such an extent that it was unable to meet the demands of the Government on the public balances it held. Negotiations were therefore opened in 1863 for the revision of the agreements, and the revised agreements came into force on January 2,1866. They contained the following provisions regarding the public balances : (1) Undertaking by Government to maintain in the hands of the banks at their head offices an “average cash balance” of 70 lakhs at the Bank of Bengal, 40 lakhs at the Bank of Bombay, and 25 lakhs at the Bank of Madras, “so far as the same may conveniently be done.” (2) Permission to the banks to use the whole balances for the time being deposited with them for banking purposes. (3) The right to interest from Government when the Government balance at the head offices of the Bank of Bengal, Bank of Bombay, and Bank of Madras fell below the minima of 45 lakhs, 25 lakhs, and 20 lakhs respectively. (4) Permission to employ” the whole of the balances (at branches) however large for the time being “for banking purposes, subject to the condition that each branch should” at all times be ready to meet the drafts of the Government” to the extent of the Government balances at the branch.