The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-11-04
PLAN NEW BANKING
SYSTEM FOR INDIA
British Government and Bank
ers Cooperate to Create Cen
trail Institution.
WOULD ISSUE ITS NOTES
Control Of Money Market Also
Would Be i'm Power of
Projected Bank.
speciai cable Despatch TO THE suS.
Copyright. 1919, oil rights reserved.


LoNpoN. Nov. 3-India's entire bank
ing system will undergo complete re-
organization In the immediate future IL
plans being laid by the British Govern
ment and banking interests be carried
out. The purpose of the plan will be
consolidation of the banking power Of
the Indian provinces, headed by a CEN
trail institution of semi-governmental
character like the United States Federal
Reserve banks That central bank
would have note issuing powers. control
the money market and look after Indian
Government finances in London through
a branch in this city.
A campaign would be started in India
at once to popularize paper money.
which the natives now refuse. midas
currency Is almost wholly silver, and
the immense expansion OF her trade
during the war has called for a great
quantity OF that metal. This has upset
the silver currencies Of all countries to
q point where something must be done
to stop up the apparently bottomless
chasm into which silver shipped to India
has been dumped.
The advantages OF central bank for
India scarcely could be disputed, con-
There exists what is called an "inde-
pendent treasury system. analogous to
the system in the United States before
its present banking plan was adopted by
the Government.
II India withdraws its funds from pri-
vate institutions a shortage results be-
cause there Is no adequate channel for
the Government to put out that money
for short loans until It Is needed again.
A central bank would provide means
for buying paper in the market and
stablizng rates in times of transfers
from private to public banks. II would
serve also to stabilize the bank rate
which In the past has fluctuated sea-
sonally from 8 to s per cent, while the
Bank OF England rate would remain
unchanged, even in such periods as the
present except for increase or decrease
Of u per cent. to l per cent. when
occasion warrants; but only infrequently
because of the method of note issuing
and control of money exercised here.
II is agreed that central bank would
do the same thing for India and to the
benefit of Government and business men.
Steps for establishment of such bank
were revealed by the Secretary OF State
for India. He said legislation was under
way to enable three of the present banks
in India to amalgamate, which done, they
would be charged with the custody of
Government funds and clothed with note
Issuing powers. After amalgamation
the central bank would undertake TO
open 100 branches throughout India
within five years. Through these
branches II is believed that the campaign
to popularize the use OF paper money In
stead OF silver would be carried on ef-
fectually
The Governments financial matters
ate handled through Consular Offices and
Government officials say that the estab-
lishment of a central bank will put those
matters in the hands OF experienced
bankers and commercial men, which Is
certain to be a great benefit.