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Bank of Hindostan was established in Calcutta in 1770: Marks 250 years of advent of British private banking in India

Summary:
In 1770, Alexander and Company established Bank of Hindostan in Calcutta which marks the advent of British Banking in India. Amiya Bagchi pointed that British tried to open banks earlier as well but there are hardly any records. Whereas we have information about BoH. Thus year 2020 marks as 250th anniversary of Bank of Hindostan. India had banking/lending institutions much before BoH but the organisation called bank began to take shape from 1770 onwards. BoH bank was not started on joint stock principles and was more like a branch of Alexander and Company which engaged in trading business. The bank issued its own notes which circulated locally in Calcutta. RBI Museum website has following information: The Bank of Hindostan (1770-1832) was set up by the agency house of Alexander and

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In 1770, Alexander and Company established Bank of Hindostan in Calcutta which marks the advent of British Banking in India. Amiya Bagchi pointed that British tried to open banks earlier as well but there are hardly any records. Whereas we have information about BoH.

Thus year 2020 marks as 250th anniversary of Bank of Hindostan. India had banking/lending institutions much before BoH but the organisation called bank began to take shape from 1770 onwards.

BoH bank was not started on joint stock principles and was more like a branch of Alexander and Company which engaged in trading business.

The bank issued its own notes which circulated locally in Calcutta. RBI Museum website has following information:

The Bank of Hindostan (1770-1832) was set up by the agency house of Alexander and Company was particularly successful. It survived three panic runs on it. The Bank of Hindostan finally went under when its parent firm M/s Alexander and Co. failed in the commercial crisis of 1832.

Nortcote Cooke in his book (The rise, progress and present conditions of banking in India 1863) has some more information. He says the bank’s notes were not accepted as legal tender by the Government. The market conditions led to wide fluctuations of the amount of issuances from two lakhs in some months to 25 lakhs.

As RBI says, BoH faced three panics. First in 1819 which was a malicious rumor. Second in 1829 when Palmer and Co. failed leading to wide disruptions in Calcutta.   Third in 1832, where a large crisis broke out in Calcutta leading to close down of not just BoH but several other banks as well. The Bank had also intertwined its operations closely with the parent trading firm which further accelerated its crisis and eventual closure.

The bank managed to survive for 60 plus years which was incredible given the volatility in economic conditions during the period. The experiment in turn influenced several other British private banks such as Commercial Bank (1819-32), Calcutta Bank (1824-29), Bank of Mirzapore (Yes 1835-37) etc. However, as you can see all these banks close down very quickly. And of course there was Presidency Bank of Bengal which opened in 1806. Bank of Bengal was supported by the East India Company and became a monopoly in Calcutta.

Amol Agrawal
I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

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