Jagat Seth

The instrument of hundika (later hundi) or bill of exchange might have originated from royal orders asking merchants/bankers to pay a certain amount, which would be reimbursed–with or without interest–later on. Kalhan’s Rajtarangini mentions such raj-hundikas given normally as payment to a local military caste, tantrin. Two examples of raj-hundika quoted in Lekhapaddhati are from 745 and 1231 CE, respectively. Post-tenth century, in the backdrop of ever-expanding trade, this instrument was adopted with greater efficiency by merchants in Western India as mentioned in Medhatithi’s legal commentary and Lekhapaddhati.

A general consensus is that the bills of exchange have originated in China during Tang times (608-906 CE) but became popular for transfer and exchange of cash and commodities during the Sung period (tenth to thirteenth century). There are also evidences of bills of exchange in the Middle East (Softa) from around the eighth century onward. As evidences suggest, as a system of remittance as well as a negotiable financial instrument, Indians have been using hundi from around the same time, if not earlier. It is also interesting to note that the extensive use of hundi is reported for the first time from Western India, merchants from this area would eventually create the most sophisticated and elaborate hundi network in the late Mughal-British period.

The use of hundi was elevated to a different level by the descendants of Hiranand Sahu, a Jain from Marwar, who started his life as a trader of modest means in Patna in the last decade of the seventeenth century. Patna was then an important administrative centre as well as a centre of riverine trade between North India and Bengal. As Rajput Princes joined the Mughal service and moved to different regions as governors or military commanders, their bankers also started moving with them. Their initial business was financing warfare or providing provisions to the military during peacetime. Gradually they found more lucrative opportunities in trading (both luxury goods like jewels and bulk goods like grains) and banking. After Agra and its satellite towns, they moved to eastern UP and then Bihar. As his trading and later on, money lending expanded rapidly, by the time of Aurangzeb’s death (1707), Hiranand Sahu emerged as one of the important wealthy men in Patna. One of his seven sons, Manekchand, settled down in Dhaka, where he struck a close bond with the Mughal Governor of Bengal, Murshid Quli Khan as his prime financier. Naturally, when Murshid Quli decided to relocate the capital to Murshidabad in 1703, Manekchand also shifted base there.

This was the real turning point for the family. Manekchand was soon given the sole minting rights in the province, which alone, as per one estimate provided him with an annual income of Rs 3.5 lakh and of course, complete control over money supply and interest rates in the wealthiest province of the Mughal Empire. The entire province was divided among a number of zamindars, who were responsible for the collection of land revenue in their areas. They were required to deposit the government’s share on a specific date, which was virtually impossible for them. Manekchand stood surety for them in exchange for 10 per cent commission and provided the governor with the required cash and the zamindars paid him later on. This provided him with an additional annual income of Rs 10 lakh.

Governor Murshid Quli Khan himself depended on him to remit his revenue to Delhi every year. The entire revenue of Bengal moved through hundis from Bengal to Delhi. Through his gaddis at Delhi, Patna, Murshidabad and Dhaka, Manekchand–who was soon given the title of Seth by the Mughal Emperor–came to control money supply and interest rates between Delhi and Dhaka. Manekchand’s adopted son, Fateh Chand, was given the key of Bengal treasury by the Mughal Emperor Farukhsiyar along with the title of Jagat Seth, given to the family in perpetuity.

Jagat Seth Fateh Chand, by some estimates, the richest individual in the contemporary world, decided not to issue any hundi worth less than one lakh rupees under his signature! Even when his kothi was plundered twice by the Marathas and he lost a great deal of money, he had no hesitation in signing darshani hundi worth one crore for the Bengal government (a darshani hundi entitled the bearer of the hundi to show it to any of the branches of Jagat Seth any time and demand one crore in cash; a muddadi hundi, on the other hand, was a date-specific hundi). When Nadir Shah plundered Delhi in 1739, the representative of Jagat Seth was given the highest respect by Nadir Shah as he alone was capable of providing surety for the Mughal nobles.

Nawab Siraj-ud-daula

Jagat Seth Fateh Chand and his successors, Mehtab Rai and Swarup Chand, came to dominate not only the economy but also politics of Bengal. Successors of Murshid Quli had to depend on them to pay the Mughal Emperors on their behalf and secure the throne for them. When the Jagat Seth did not like Sarafraz Khan, he was replaced with Alivardi Khan as the new Nawab of Bengal. So, when Siraj-ud-daula, the successor of Alivardi displeased them (along with almost every important noble and financier) and thrown them into prison, Siraj’s fate was sealed. In a conspiracy, primarily hatched by the Jagat Seths, Siraj was thrown out (Battle of Palashi, 1757) and replaced by Mir Jafar. Jagat Seths were immediately back in the saddle but their decline had started. Mir Qasim, who replaced Mir Jafar, tried to assert his independence. Mir Qasim wanted the Jagat Seths to finance his campaign against the British. As the Jagat Seths resisted, both Mehtab Rai and Swarup Chand were killed in Munger, Mir Qasim’s new capital and their body parts were fed to animals. The fortunes of the House of Jagat Seth declined rapidly thereafter.

In a period, when there was greater monetisation of land revenue (through revenue farming or izaradari system) than ever before, Jagat Seths, though preeminent, were not alone. The house of Daddas was the principal banker for Jodhpur, Bikaner, and Jaisalmer; they were also present in Indore and Hyderabad. The Pittys and the Ganeriwalas dominated in Hyderabad. In various other Princely states of Rajasthan and Central India, the Bapnas, the Lodhas and other Marwari (mostly Jain) families predominated. There was Kashmiri Mull in Lucknow and the house of Gopaldas Manohardas in Banaras. Not only for the Nawab and Zamindars of Bengal, for all the European Companies in Eastern India–English, French, Dutch, and Danish, the Jagat Seth was the most important source of credit. We know how the British in Bombay were bankrolled by Surat-based bankers like Arjunji Nathji Travady and others. Some of these firms, like the Dagas of Bikaner and the Malpanis of Jabalpur continued to be important for the British in the same way.

For more such stories related to Indian business history, see Laxminama: Monks, Merchants, Money and Mantra by Anshuman Tiwari and Anindya Sengupta Bloomsbury 2018

https://www.amazon.in/Laxminama-Monks-Merchants-Money-Mantra/dp/9387146782