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Frauds in those good old days
December, 14th 2006

Amiya Kumar Bagchi, director of the Institute of Development Studies, Kolkata, wrote the history of State Bank of India a decade ago. The book, originally published by Oxford University Press, is now out as a Penguin Portfolio title The Evolution of State Bank of India.

The bank has its origins two centuries ago, in 1806, "when its first predecessor, the Bank of Calcutta (later re-designated as Bank of Bengal) was set up in Calcutta under the authority of the East India Company's Government in India," reminisces the foreword by D. N. Ghosh. And the preface describes the epic nature of the exercise, with archives having to be collected from depositories in various cities in India, and London.

Interestingly, the first histories about banks in India were written almost 150 years ago. Charles Northcote Cooke, who had joined the Bank of Bengal in the 1830s, authored "the first book on the history of modern banking in India," apart from publishing a book in India on the American system of bookkeeping.

The Company's officers made the first attempt to set up a bank much earlier in 1683, in Madras. "Managed by the members of the Council it was a bank of deposit (on which interest was paid) and discount. Very probably the bank did not issue notes. Not much is known about the later history of this bank," chronicles Bagchi, citing H. D. Love's `Vestiges of Old Madras' (1913).

Good old days?

The volume on hand is the first, running to nearly 1,300 pages, and encompassing the years from 1806-1876, `the roots'. Good old days, some may say nostalgically, but chapter 18 can bulldoze any fondness attached to the past. For, it is about `frauds, forgeries and other disturbances.'

Several features of the banking business `presented novel opportunities for making profits through fraudulent practices,' and one of the first vulnerabilities was forgery. In the very first week of the operation of the Bank of Bengal, Mr Justice Martyn, a Calcutta Magistrate, wrote a letter to the bank to point out "that there was a loophole in the law relating to the conviction of persons accused of stealing bank notes." His suggestion was that the notes printed by the bank be given legal protection, and that the stealing of the notes should be regarded as felony.

"On February 1, 1811, the directors of the bank decided after due deliberation, to pay a forged note worth Rs 500 because they felt a refusal to pay would be injurious to the acceptability and circulation of bank notes. They also decided to pay anybody who had come `fairly to be possessed' of forged notes... . The culprits responsible for the forgeries went undetected for a long time."

In mid 1819, a gang was arrested; it had was `in the scheme of extensive forgery of the notes not only of the Bank of Bengal, but also of the Bank of Hindostan." An intensive search `in every part of the houses of the culprits' unearthed `two copper plates,' one for each bank. These were found `in a common earthen vessel buried about a foot and a half below the ground.'

Prescribed weekend reading for professionals.

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