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Indigenous banking system is the system of banking that involves private firms or individuals who act as banks by providing financial services such as loans and accepting deposits. Indigenous banking system is made up of indigenous bankers who do not fall under the purview of the government.Indigenous bankers, apart from providing loans, also accept deposits and deal in ‘hundis,’ which was used as an instrument of exchange, while moneylenders provided loans but did not deal in ‘hundis.’
Promissory Note
• Lending money on a promissory note is one of the common methods. The one who wants to borrow money goes to a moneylender, negotiates an interest rate with him, and secures the loan after signing a promissory note guaranteeing to pay the principal and interest on demand.
Dastavez
• Dastavez, or bonds, are another type of security against which loans are granted. They are written on legal forms that have been stamped and are correctly executed. Their unique feature is that they record all of the loan’s terms in writing and in a detailed manner, increasing its reliability.
Rahan
• It is also a widely known method and refers to borrowing money through a mortgage on a property or land.
1. Accepting deposits from the public: It is one of the important functions of the bankers.The deposits will be for a fixed period and can be of either fixed or current period.
2.Providing loans against security: Indigenous bankers provide loans against securities or assets such as land, vehicles, gold ornaments, etc.
3. Discounting Hundis: Hundis were important instruments of money exchange for the businesses in times before new instruments were introduced. Discounting Hundis is one of the most profitable businesses for the indigenous bankers.
Hundis are of two types 1) Darshni or Sight hundi, a hundi that is payable on demand and 2) Muddati Hundi, a hundi that is payable after a certain time period. The time period after which it becomes payable is mentioned at the face of the hundi.
4. Remittance: Indigenous bankers also provide remittance services by having separate branches or tie ups with other indigenous bankers across the country.
• Pataliputra
• Peshawar
• Taxila
• Indraprastha
• Mathura
• Varanasi
• Mithila
• Ujjain
• Surat
Exports consisted of spices, wheat, sugar, indigo, opium, sesame oil, cotton, parrot, live animals and animal products—hides, skin, furs, horns, tortoise shells, pearls, sapphires, quartz, crystal, lapis, lazuli, granites, turquoise and copper etc.
Imports included horses, animal products, Chinese silk, flax and linen, wine, gold, silver, tin, copper, lead, rubies, coral, glass, amber, etc.
•After Independence, India went for centralised planning.
→ In 1952, the First Five Year Plan was implemented and importance was given to the establishment of modern industries, modern technological and scientific institutes, space and nuclear programmes.
→ However, the Indian economy could not develop at a rapid pace due to lack of capital formation,rise in population, huge expenditure on defence and inadequate infrastructure.
•Thus, India relied heavily on borrowings from foreign sources and finally, agreed to economic liberalisation in 1991.
•Today, Indian economy is one of the fastest growing economies in the world today and a preferred FDI destination.
•The recent initiatives of the Government of India such as ‘Make in India’, Skill India’, ‘Digital India’ and roll out of the Foreign Trade Policy (FTP 2015-20) is expected to help the economy in terms of exports and imports and trade balance.