Hostname: page-component-cd9895bd7-8ctnn Total loading time: 0 Render date: 2024-12-26T21:27:21.594Z Has data issue: false hasContentIssue false
  • English
  • Français

Caste as self-regulatory club: evidence from a private banking system in nineteenth century India

Published online by Cambridge University Press:  28 December 2015

MALAVIKA NAIR
MALAVIKA NAIR*
Affiliation:
Johnson Center for Political Economy, Sorrell College of Business, Troy University, Troy, AL 36081, USA
*
*Email: mnair@troy.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

The Chettiar banking system evolved and functioned in the absence of a government sponsored central bank in 19th-century India. I find that the underlying common social institution of caste was crucial for the workings of the banking system and effectively acted as a club. Exclusion was achieved by restricting membership by birth and the practice of endogamy. These mechanisms created the necessary incentives to provide meaningful rules as well as their enforcement. I describe and analyze the privately provided self-regulatory mechanisms of clearinghouses, inter-bank lending and information sharing. The Chettiar banking system thus adds to existing instances of self-regulated banking as well as points to the economic underpinnings of caste as an institution.

Type
Research Article
Information
Journal of Institutional Economics , Volume 12 , Issue 3 , September 2016 , pp. 677 - 698
Copyright
Copyright © Millennium Economics Ltd 2015 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Adas, M. (1971), The Burma Delta: Economic Development and Social Change on an Asian Rice Frontier, 1852–1941, Madison: University of Wisconsin Press.Google Scholar
Baker, C. (1984), An Indian Rural Economy, 1880–1955: The Tamilnad Countryside, Oxford: Clarendon Press.Google Scholar
Banking and Monetary Statistics of India. (1954), Reserve Bank of India, Bombay.Google Scholar
Beck, T. (2002), ‘Deposit Insurance as Private Club: Is Germany a model?’, Quarterly Review of Economics and Finance, 42 (4): 701–719.CrossRefGoogle Scholar
Beteille, A. (1996), ‘Varna and Jati’, Sociological Bulletin, 45 (1): 15–27.Google Scholar
Boot, A. (2000), ‘Relationship Banking: What do we know?’, Journal of Financial Intermediation, 9.CrossRefGoogle Scholar
Briones, I. and Rockoff, H. (2005), ‘Do Economists Reach a Conclusion on Free-Banking Episodes?’, Econ Journal Watch, 2 (2): 279–324.Google Scholar
Buchanan, J. (1965), ‘An Economic Theory of Clubs’, Economica, 32 (125): 1–14.Google Scholar
Calomiris, C. and Kahn, C. (1996), ‘The Efficiency of Self-regulated Payment Systems: Learning from the Suffolk System’, Journal of Money, Credit and Banking 28 (4): 766–797.CrossRefGoogle Scholar
Chakravarti, N. (1971), The Indian Minority in Burma: The Rise and Decline of an Immigrant Community, Oxford: Oxford University Press.Google Scholar
Chandavarkar, A. (2008), ‘Money and Credit, 1858–1947’, The Cambridge Economic History of India, vol. 2, c. 1757–2003, New Delhi: Orient Longman.Google Scholar
Chandrasekhar, S. (1980), The Nagarathars of South India: An Essay and a Bibliography on the Nagarathars in India and South-East Asia, Madras: Macmillan India Press.Google Scholar
Chapman, S. (1984), The Rise of Merchant Banking, London: George Allen & Unwin.Google Scholar
Curtin, P. (1984), Cross Cultural Trade in World History, Cambridge: Cambridge University Press.Google Scholar
De Roover, R. (1963), The Rise and Decline of the Medici Bank, 1397–1494. Cambridge: Harvard University Press Google Scholar
Dowd, K. (1989), The State and the Monetary System, Hemel Hempstead: Philip Allan, and New York: St. Martin's Press.Google Scholar
Dowd, K. (1991), ‘The Evolution of Central Banking in England, 1821–90’ in Capie, F. and Wood, G. E. (eds.), Unregulated Banking: Chaos or Order?, London: Macmillan.Google Scholar
Dowd, K. (ed). (1992), The Experience of Free Banking, London: Routledge.CrossRefGoogle Scholar
Dowd, K. (1994), ‘Competitive Banking, Bankers’ Clubs, and Bank Regulation’, Journal of Money, Credit and Banking, 26 (2): 289–308.Google Scholar
Evers, H. and Pavadarayan, J., (2006), ‘Religious Fervour and Economic Success: The Chettiars of Singapore’, in Sandhu, K. S. and Mani, A. (eds.), Indian Communities in South-East Asia, Singapore: Institute of South-east Asian Studies.Google Scholar
Goldthwaite, R. (1987), ‘The Medici Bank and the World of Florentine Capitalism’, Past and Present, 114 (114): 3–31.CrossRefGoogle Scholar
Goodhart, C. (1987), ‘Why do Banks Need a Central Bank?’, Oxford Economic Papers, New Series, 39 (1): 75–89.Google Scholar
Goodhart, C. (1988), The Evolution of Central Banking, Boston: MIT Press.Google Scholar
Gorton, G. and Mullineaux, D. (1987), ‘The Joint Production of Confidence: Endogenous Regulation and Nineteenth-Century Commercial Bank Clearinghouses’, Journal of Money, Credit, and Banking, 19 (19): 457–468.Google Scholar
Gubbay, M. (1927), Indigenous Indian Banking: A Paper read at the Royal Society of Arts, London, Bombay: D.B Taraporevala Sons and Co. Google Scholar
Ito, S. (1966), ‘A Note on the ‘Business Combine’ in India: with Special Reference to the Nattukottai Chettiars’, The Developing Economies, 4 (3): 367–380.Google Scholar
Jain, L. (1929), Indigenous Banking in India, London: Macmillan and Co. Google Scholar
Keynes, J. (1913), Indian Currency and Finance, London: Macmillan and Co. Google Scholar
Krishnan, V. (1959), Indigenous Banking in South India, Bombay: State Co-operative Union.Google Scholar
Lamb, H. (1955), ‘The Indian Business Communities and the Evolution of an Industrialist Class’, Pacific Affairs, 28 (2): 101–116.Google Scholar
Mahadevan, R. (1978a), ‘Pattern of Enterprise of Immigrant Entrepreneurs: A Study of Chettiars in Malaya, 1880–1930’, Economic and Political Weekly, 13 (4/5): 146–152.Google Scholar
Mahadevan, R. (1978b), ‘Immigrant Entrepreneurs in Colonial Burma–An Exploratory Study of the Role of Nattukottai Chettiars of Tamil Nadu, 1880–1930’, Indian Economic and Social History Review, 15 (329): 329–358.Google Scholar
Masters, A. (1957), ‘The Chettiars in Burma: An Economic Appraisal of a Migrant Community’, Population Review, 1 (1).Google Scholar
McNutt. (1999), ‘Public Goods and Club Goods’, Encyclopedia of Law and Economics, 927–951.Google Scholar
Menon, R. (1985), ‘Banking and Trading Castes in the Colonial Period: The Case of the Nattukotai Chettiars of Tamil Nadu’, South Asia Bulletin, 5 (2): 19–26.Google Scholar
Morrison, A. and Wilhelm, W. (2004), ‘Partnership Firms, Reputation, and Human Capital’, American Economic Review, 94 (5): 1682–1692.Google Scholar
Mukherjee, A. (2011), ‘Transition of Credit Organizations: Caste Bankers in Colonial India’, Working Paper.Google Scholar
Mullineaux, D. (1987), ‘Competitive Monies and the Suffolk Bank System: A Contractual Perspective’, Southern Economic Journal, 54 (4): 884–897.Google Scholar
Nair, M. (2011), ‘Enforcement of Nineteenth Century Banking Contracts using a Marriage Rule’, Quarterly Review of Economics and Finance, 51 (4): 360–367.Google Scholar
Nair, M. (2013), ‘Fractional Reserves and Demand Deposits: Historical Evidence from an Unregulated Banking System’, The Independent Review, 18 (1): 77–88.Google Scholar
Padgett, J.F. (2001), ‘Organizational Genesis, Identity and Control: The Transformation of Banking in Renaissance Florence’, Networks and Markets. Russell: Sage Foundation Publications.Google Scholar
Report of the Burma Provincial Banking Enquiry Committee. (1930), 3 vols published by the Government of Burma.Google Scholar
Report of the Madras Provincial Banking Enquiry Committee. (1930), Vol 1, published by the Government of India.Google Scholar
Roy, T. (2010), Company of Kinsmen: Community and Enterprise in South Asian History 1700–1940, Oxford: Oxford University Press.Google Scholar
Rudner, D. (1994), Caste and Capitalism in Colonial India: The Nattukottai Chettiars, Berkeley: University of California Press.Google Scholar
Sandler, T. and Tschirhart, J., (1997), ‘Club Theory: Thirty years later’, Public Choice, 93 (3–4): 335–355.Google Scholar
Selgin, G. (1988), ‘Competitive Monies and the Suffolk Bank System: Comment’, Southern Economic Journal, 55 (July): 215–219.Google Scholar
Selgin, G. and White, L. (1987), ‘The Evolution of a Free Banking System’, Economic Inquiry, 25 (July): 439–457.CrossRefGoogle Scholar
Shenoy, B. (1941), Ceylon Currency and Banking, London: Longmans, Green and Company.Google Scholar
Smith, V. (1990), ‘The Rationale of Central Banking and the Free Banking Alternative’, Liberty Fund, Indianapolis, IN.Google Scholar
Srinivas, M. (1962), Caste in Modern India and Other Essays, Bombay: Asia Publishing House.Google Scholar
Timberlake, R. (1984), ‘The Central Banking Role of Clearinghouse Associations’, Journal of Money, Credit and Banking, 16 (1): 1–15.Google Scholar
Thapar, R. (2003), The Penguin History of Early India: From the Origins to AD 1300, London, UK: Penguin Publishing.Google Scholar
Thapar, R. (2004), Ancient Indian Social History: Some Interpretations, Delhi: Orient Longman.Google Scholar
Thaplyal, K. (1996), Guilds in Ancient India: A Study of Guild Organization in Northern India and Western Deccan from circa 600 B.C. to circa 600 A.D, New Delhi: New Age International Publishers.Google Scholar
Tun Wai, U. (1953), Burma's Currency and Credit, London: Orient Longmans.Google Scholar
Tun Wai, U. (1956), ‘Interest Rates in the Organized Money Markets of Underdeveloped Countries’, Staff Papers- International Monetary Fund, 5 (2): 249–278.Google Scholar
Turnell, S. (2009), Fiery Dragons: Banks, Moneylenders and Microfinance, Burma: Nordic Institute of Asian Studies Press.Google Scholar
Weerasooria, W. (1973), The Nattukkottai Chettiars: Merchant Bankers in Ceylon, Sri Lanka: Tisara Prakasakayo.Google Scholar
White, L. (1984), Free Banking in Britain: Theory, Experience and Debate, 1800–1845, Cambridge: Cambridge University Press.Google Scholar
White, L. (1989), Competition and Currency: Essays on Free Banking and Money, New York: New York University Press.Google Scholar
White, L.H. (1999), Theory of Monetary Institutions, Wiley-Blackwell.Google Scholar