22.6 Indian Mercantile Classes, Banking, Insurance, and Credit Systems in Mughal India

The vibrant and diverse Indian mercantile landscape during the Mughal period encompassed a wide spectrum of traders, from local peddlers to big-time merchants engaged in overseas commerce. Specialized groups, including merchants, brokers, and sarrafs (moneychangers and bankers), played essential roles at various levels in the commercial process. As trade flourished, existing practices and institutions were strengthened, and new systems such as banking, bills of exchange, lending, trading partnerships, and insurance emerged.

Personnel of Trade

Merchants, Sarrafs, Moneylenders, and Brokers

The personnel engaged in trade and commerce in Mughal India were diverse and encompassed various groups:

1. Merchants:
   • Although theoretically, the vaisyas (merchant caste) were expected to indulge in commercial activities, people from various backgrounds actively participated in trade.
   • Certain groups and castes dominated specific regions during this period.
   • The Banjaras were a significant trading group facilitating rural-urban trade by transporting commodities between villages and towns. They were known for dealing in grain, pulses, sugar, salt, etc., and traveled with their families and livestock.
   • In North India and Deccan, Baniyas (Hindu and Jain) were prominent merchants. They traded in diverse commodities and also acted as moneylenders, providing loans to peasants and state officials.
   • Khatris were a major trading community in Punjab, while Bohras played a crucial role in Gujarat’s commercial landscape.
   • Various merchant groups, such as Chetti, Komatis, and Marakkayar, were active in South India, especially in coastal trading and overseas shipping.
2. Moneylenders and Sarrafs:
   • Traditional merchants often played the dual role of traders and moneylenders, providing loans to individuals and acting as bankers.
   • Sarrafs served as experts in judging the metallic purity of coins, determining their exchange rates, and performing banking functions, such as receiving deposits, giving loans, and issuing bills of exchange.
3. Brokers:
   • Dallals or brokers were specialized mercantile professionals who played a pivotal role in various commercial transactions.
   • With increasing inter-regional and foreign trade, brokers became crucial, especially for foreign merchants unacquainted with local markets and languages.
   • They were employed by companies, worked for multiple clients, and facilitated buying and selling deals across different commodities and regions.

Merchants in Different Regions

Banjaras and Nomadic Traders

• The Banjaras were an essential trading group, particularly in North India, known for transporting commodities between villages and towns.
  • They were organized into groups called “Tanda,” each with its chief known as “Nayaka.”
  • Banjaras dealt in commodities like grain, pulses, sugar, salt, etc., and played a vital role in rural-urban trade.
• Other nomadic traders, such as the Nahmardis in Sindh and Bhotiyas between the Himalayas and plains, operated in different parts of North India.

Baniyas and Other Leading Merchants

• The Baniyas, an important vaisya subcaste, were prominent merchants in North India and Deccan, with counterparts like Khatris and Kornatis in other regions.
• Baniyas hailed from Hindu and Jain communities and engaged in various trading activities, including grain, textiles, gold, silver, jewels, spices, and more.
• They had strong caste bonds and councils (mahajans) for their community.
• European travelers praised the Baniyas for their exceptional merchant skills, accounting, and book-keeping.

Merchants in South India

• In South India, various merchant groups played significant roles in trade.
• The Chetti, derived from the Sanskrit term “Shreshthi,” were wealthy merchants, while the Kling operated along the Coromandal coast up to Odisha.
• The Komatis were Telugu-speaking merchants who acted as brokers for textiles and supplied products from the hinterland to southern port towns.
• The Marakkayar, a subgroup of the Chulias, were wealthy merchants involved in coastal and South East Asian trade.
• Chrutian Paravas and Golkunda Muslims were also active in coastal trading and overseas shipping.

Foreign Merchants

• Many references indicate the presence of foreign merchants in Indian commercial centers, with Europeans being prominent.
• Among these foreign merchants, Armenians were the most notable, dealing in various commodities and settled in Bengal, Bihar, and Gujarat.
• Other foreign merchants, such as Khorasanis, Arabs, and Iraqis, were also frequent visitors to Indian markets.

Moneylenders and Sarrafs

• Traditional merchants often doubled as moneylenders, providing loans to individuals and even state officials.
• Sarrafs played three distinct functions:
  1. As money-changers, they assessed the purity and weight of coins and determined exchange rates.
  2. As bankers, they accepted deposits, issued loans, and dealt with bills of exchange (hundis).
  3. They were also part of the Mughal mint establishment, fixing the purity of bullion and verifying coin purity after minting.

Brokers: Middlemen in Commerce

• Brokers, known as dallals, emerged as crucial middlemen in commercial activities and transactions, particularly with the growth of inter-regional and foreign trade.
• Foreign merchants heavily relied on native brokers due to their lack of knowledge about production centers, marketing patterns, and local languages.
• Brokers facilitated deals in various commodities, and their presence was widespread across commercial centers, including foreign ports.

Bills of Exchange (Hundi)

The bills of exchange, commonly known as “hundi,” were vital instruments in Mughal India’s commercial landscape. They were paper documents or letters of credit that promised payment of money after a specified period at a certain place and a discounted rate. The hundis often included insurance charges (bima) based on various factors such as the value of the goods, destination, and means of transport.

Reasons for the Widespread Use of Hundi

• Initially, hundi emerged as a safe and convenient method for transferring money, eliminating the need to carry large amounts of cash.
• Over time, hundi itself became a medium of transaction and was freely bought, sold, and endorsed in the market.
• Hundis were extensively used in both commercial and state transactions, including the payment of salaries to soldiers and the transfer of tributes to the Mughal Emperor.

Role of Sarrafs

• Sarrafs, who specialized in money-changing, also dealt with hundis, acting as private banks.
• They created credit through hundis, which facilitated commerce, particularly long-distance and international trade.
• Sarrafs charged a commission on each hundi, and the rate of exchange varied based on interest rates and the duration of the hundi.

Widespread Use of Hundi

• Merchants, sarrafs, and even nobles extensively used hundis for commercial and personal transactions.
• Some big merchants and sarrafs had their agents at important commercial centers, and the use of hundis was so brisk that merchants in Ahmadabad made payments and settled obligations primarily through hundis.

Banking

Apart from issuing bills of exchange, sarrafs also provided banking services, receiving money for safe deposit and returning it to depositors on demand. Depositors received interest on their deposits, and the rate of interest fluctuated over time.

Moneylending and Usury

• Moneylending was an established practice for personal and commercial purposes.
• The rate of interest for loans varied depending on individual needs, credit in the market, and bargaining power.
• Peasants sometimes took loans at a high rate of 150% per annum in Bengal in the eighteenth century.
• Commercial loan rates differed from one region to another, and loans were generally for short periods.

Bottomry

Bottomry was a speculative investment practice prevalent during the Mughal period. In bottomry, money was lent at high rates, ranging from 14 to 60%, to invest in a cargo for a specific destination. The lenders bore all the risks of the sea voyage.

Partnership

Merchants formed partnerships, pooling their resources to carry on trade. Some nobles also engaged in joint ventures for overseas trade, highlighting the collaboration between the state and the business community.

Insurance (Inland and Marine)

Insurance was practiced on a limited scale during this period. Sarrafs often took responsibility for the safe delivery of goods, and records of English factories also mention inland and overseas insurance of goods and ships.

Merchants, Trading Organizations, and the State

• Taxes were levied on trading activities, but the income from these sources was relatively small compared to land revenue.
• Administrative officers in towns were responsible for maintaining law and order and ensuring a conducive environment for trade.
• Merchants had their own guilds and organizations, such as “mahajans” in Gujarat, which framed rules and resolved disputes among traders.
• The wealthiest and most influential merchant in a town was called “nagar seth,” acting as a link between the state and the trading community.
• Merchant organizations were strong and could protest against repressive measures of town and port officers.
• While merchants generally avoided politics, some nobles ventured into trading, often using their official positions to profit from commerce.

In conclusion, the commercial practices in Mughal India were diverse and evolved to meet the needs of a vibrant economy. Bills of exchange, banking services, insurance, and other practices played essential roles in facilitating trade and ensuring the smooth flow of goods and finances. The close collaboration between merchants, trading organizations, and the state contributed to the flourishing trade and commerce of the Mughal period.