THE BANKS OF INDIA.

Dominion, Volume 7, Issue 1963, 21 January 1914, Page 8

THE BANKS OF INDIA.

IJIUSHROOM SORTS.

NEW ZEALANDER'S IMPRESSIONS,

In view of the recent nativo bank smashes in India, the folowing particulars, supplied to a Dominion representative by Mr. J. L. Rruce, of the New Zealand Agricultural Department, who has just returned from India, aro of interest. Mr. Bruce states that tho Government of India recently requested the various Chambers of Commerce to send in their views regarding proposed banking legislation, and, as a result of the request (although there was some-diver-gence of opinion), tho replies indicated that tho commercial verdict was that protective legislation was distinctly roquired. What is felt to bo undoubtedly needed by Anglo-Indian houses is official control, and Government power to exercise s-uch control if need be. It is felt that it, is unreasonable to lay down a fixed rule in tho direction of defining exactly what minimum capital a bank shall start operations with, or what minimum subscribed capital is necessary before a bank is allowed to start business. Tho question is ono which to a large extent depends on the particular circumstances governing each case, as even small banks, if properly run, aro felt to Le most useful institutions, Government Support Needed. 'An authoritative opinion has been expressed in India, said Mr. Bruce, that what was urgently required under present economic conditions in India was power for tho Government to step in and help and support, with money as well as advico, any institution which was running off tho rails, giving substantial help of such a nature that it would not bo necessarily aiding the executive and shareholders of tho bank, but would be applied in the interests of tho public and tho masses of ignorant depositors. This matter was fully dealt with by a financial writer in tho Calcutta "Statesman," who -stated that it might bo objected that such functions would saddle the Administration with now and enormous responsibilities, but, he felt', under the peculiar conditions existing in India, tho Government had certain responsibilities which it could not escapo. It was tho outlook and view of tho masses on the Indian Administration that required so much consideration, and counted . for so much. Tlio masses were undoubtedly, though it might be very gradually becoming enlightened, if not actually "English educated," and it was this"element in.tho social plan that mattered as much as anything, Tho same, writer pointed out that 00 per cent, of the ordinary natives in the street or tho fields looked upon a bank, with its office and' public counters, and its European executive staff, as a Government institution. Those Puny Banks. In the Punjab colonies and all over India gencraiy it is being recognised by til© masses that educated natives are being givon a greater number of gazetted or superior billets in tho Government. service, and it was not surprising, therefore, to hear tliat in all the numerous smaller Villages! all over Upper India the mushroom banks which started business were looked upon as a P ar t °f fome sort of official scheme. Ir the Government failed, to look after these banks tho public would probably express the .opinion that it ought to do so. Question of Rsserves. One' of tho most important points in the now banking legislation which would now certainly comc in would' b'<| on the question of reserve funds. What' constitutes a bank reserve, and what were a bank's responsibilities to the public in this connection wero questions whicli would require a clear exposition and settlement. Under tho Co-operative Credit Society Act- of India, a Banking Society was compelled to put 25 per cent, of its profits every year to its reserve. Another important point was tho question of the percentage of cash balances which a bank should have available in relation to its public liabilities. In the Presidency Banks a proportion of one-third had come to bo recognised as a sort of safe normal figure. It was felt that ono of the best and surest means of ensuring the adoption of a substantial aiid adequate margin of safety by all banks in India .would be with tho direct aid of public opinion. It should be mado compulsory under the law that every bank should clearly stato on its periodical balance-sheets, duly certified by accredited auditors,.what its percentage of cash to liabilities actually worked out at, in precisely the samo way as" tho Bank of Bengal gave such a figure in its statement issued weekly,. This would servo as a reminder of the position, as well as a safety index and an earnest of good faith. ■ " '