Any treatise on the banking system of this country-would be incomplete without a reference to the constitution and operations of those important institutions usually termed the Anglo-Indian banks, whose province it is to facilitate and .encourage the commerce of Great Britain with her gigantic dependency, as well as with China, Japan, and other countries of the far east. When it is remembered that the aggregate exports and imports of India alone now amount to upwards of one hundred millions sterling per annum, and that the great bulk of this enormous business is financed through London, it will be readily understood that the transactions of this division of our banking community form no inconsiderable portion of the entire banking business of the country, and that they frequently exercise an important influence on the condition of the London money market.

Although English banking in India commenced in the early part of the present century, it is only within the last fifteen years that it has assumed important dimensions. An increase in the number of banks and in the extent of their operations and resources is usually concomitant with the growth of the commerce and prosperity of the country with which they are connected, and this is seen to be the case with regard to India, although, owing to the peculiarly distrustful character of the natives, banking under English management has not made such rapid strides as might have been expected in a country which possesses immense wealth, and has enjoyed for many years the advantage of British rule. It is an important fact bearing on this subject, and one worthy of the attention of our statesmen, that notwithstanding the length of time which has elapsed since the establishment of British supremacy in India, and the recognized justness and stability of our Government, the vast majority of the natives still prefer to hoard their money, or to place it in the hands of the shroffs or natives bankers, rather than invest it in Government securities or deposit it with banks under the management and control of Europeans. This feeling of distrust is well exemplified in a return recently issued by the Indian Finance Minister, in which it is shown that out of Rs. 71,64,57,470 composing the registered debt of India, Rs.54,20,44,487, or 75.66 per cent., was held by Europeans, while only Rs.l7,44,12,983, or 24.34 per cent., was held by natives.* It is true that the percentage of the holding of the latter has increased slightly as compared with what it was six years ago, but the above figures are sufficient to prove that the richer class of natives do not look upon the securities of the Government with much favour.

The fabulous wealth which from time immemorial has been steadily poured into India, and which for the past forty years amounted in gold to £104,839,000 and in silver to £238,492,000, would in a more civilised country have formed the basis of immense financial and banking systems, but in India no sooner does the treasure arrive than it filters away into the interior in exchange for produce, and disappears from circulation. Much of the precious metals imported is converted into bangles and other personal ornaments, while large quantities are buried in the ground and otherwise hoarded. If only one fourth of the immense wealth which India has thus absorbed during the present century had been placed in the hands of banks, and through their medium rendered available for the construction of roads, railways, canals, and other works of public utility, the advantages that India would have derived therefrom would have been incalculable. As it is native capital has done little or nothing for the country, and whenever the Government has required money for railway and other public works, it has been obliged to come to London for a loan. Of those rupee loans that have been raised in India by far the greater part has been subscribed for by the banks and European capitalists, and we have recently seen that when one of the richest princes of India wished to construct a railway through a portion of his dominions, he resorted to this market for the necessary funds.

* These figures refer only to the Rupee Loans which have been raised in India, and must not he taken to include the Sterling Loans issued in London. The total Funded Debt of India (irrespective of £96,000,000, the capital of the Guaranteed Railways) at March 31st, 1876, was officially stated to be £122,366,594 (taking the rupee at 2s.), and the average rate of interest 4.33696 per cent. Of the above amount £49,605,283 represented the Sterling Debt.

It may be argued that notwithstanding the vast influx of specie into the country, the great mass of the natives remain in a state of poverty, and live only from hand to mouth. This is doubtless true, but it is also a well-known fact that there are many thousands of Zemindars, Talook-dars and other rich natives spread over India who hoard their accumulated wealth from one generation to another. It is these who sit calmly by and watch the Government spending the whole of its revenue and increasing its liabilities in its efforts to develop the resources of the country and to improve the condition of the people, well knowing that it is they who will ultimately derive the greatest benefit from the vast expenditure that is being incurred. The extension of the railway system enables them to send their produce to better markets, and while they receive an increased amount of rupees, they are happy in the knowledge that the rent which they pay to Government for their lands is permanently fixed, and cannot be altered to their disadvantage. The recent great fall in the Eastern exchanges, which caused a heavy loss to the Government, has been the source of considerable benefit to the native landowners, by stimulating the export trade of India, and raising the prices of raw produce.

It is to be hoped that the judicious policy lately announced by the Government of raising all fresh loans for public works in India instead of in London will be found practicable, and even assuming that rupee loans could not now be raised on such favorable terms as were some of the recent issues, it would seem sound policy on the part of the Government to make some concessions as an inducement to the natives to subscribe more freely. The practice which has been pursued for many years of raising loans in London with interest and principal payable in gold, while the revenues of India are collected in silver, has at length proved to be fraught with such serious difficulties to the Government that it is not surprising they should endeavour to abandon it.