Indian Mercantile Classes, Banking, Insurance And Credit Systems In Mughal India

Indian Mercantile Classes, Banking, Insurance And Credit Systems In Mughal India


A broad spectrum of merchants peddling at the local level to the big traders involved in overseas commerce were to be found in all parts of the country. In the whole commercial process, certain specialised groups of merchants, brokers and sarrafs played their role at various levels.

Large scale trading operation strengthened some of the existing practices and institutions and gave rise to new ones. Systems of banking, bills of exchange and lending of money were important ones. Trading partnership and insurance were also in vogue.


Merchants, sarrafs, moneylenders and brokers were operating in Indian markets to perform trade and commerce. Increasing commercial activities attracted a large number of people to these professions. However, the above trading groups were not necessarily divided into watertight compartments. At times the same person did two or more tasks at the same time.

1) Merchants

Theoretically, vaisyas were supposed to indulge in commercial activities, but in actual practice people from a wide range of background could and did participate in it. During this period we notice that certain groups and castes dominated in particular regions.


In our sources we get innumerable references to the banjaras as a trading group who carried on trade between villages and between villages and towns in a region and even at inter-regional level. They were an important link for rural-urban trade. The Banjaras confined their trading activities to some limited commodities like grain, pulses, sugar, salt, etc. They procured a number of animals (mainly oxen to carry the load) and moved from place to place buying and selling goods.

Jahangir in his Tuzuk-i Jahangiri records: “In this country the Banjaras are a fixed class of people, who possess a thousand oxen, or more or less, varying in numbers. They bring grain from the villages to the towns, and also accompany armies”.

The Barkjaras generally moved with their families and household in groups. These groups moving together were called a Tanda. Each Tanda had its chief called Nayaka. At times a Tanda could have upto 600-700 persons (including women and children), each family having their oxen.

The Banjaras were both Hindus and Muslims. Some scholars divide them into four groups on the basis of commodities they traded in: grain, pulses, sugar, salt, and wood and timber.

The Banjaras operated in many parts of North India, but there were other similar traders known by different names. The Nahmardis was one such group of traders operating in Sindh. Another such nomadic traders were the Bhotiyas operating between the Himalayas and plains.

Merchants in Different Regions:

An important vaisya subcaste, that is, the Baniyas were the leading merchants in North India and Deccan. They belonged to the Hindu and Jain (mainly in Gujarat and Rajasthan) communities. Their counterparts were the Khatris in Punjab and Kornatis in Golkunda.

The word Baniya is derived from a Sanskrit word vanik meaning merchant. Many of the Baniyas carried surnames pointing to the place of their origin. The Agarwals came from Agroha (in present Haryana) and the Oswals from Osi in Marwar. Marwar gave probably the highest number of traders who are generally referred to as Marwaris. They were to be found in all parts of India and were the most eminent merchant group during this period. There was a close caste bond between these merchants. They had their councils (mahajan).

Contemporary European travelers (Linschoten, 1583-89; Tavernier, 1656-67) marvelled at the skills of the Baniyas as merchants and had all praise for their accounting and book-keeping. The Baniyas unlike Banjaras were involved in all sorts of trading activities. At the village level, they traded in grain and other agricultural produce. They also acted as moneylenders, giving loans to peasants and other people including state officials and nobles. In towns they dealt in grain, textiles, gold, silver, jewels, spices and sundry other commodities. Some of them possessed assets of millions of rupees. They owned ships also. The community as a whole was known for simplicity and frugality.

In the region of Punjab, the Khatris were a major trading community. Guru Nanak, the founder of Sikh religion, was also a Khatri. Many of them were converted to Islam. This community had in its fold Hindus, Muslims and Sikhs.

The Multanis were an important trading community of Delhi, parts of Punjab and Sindh in the 13-17th centuries.

The Bohras were important merchants of Gujarat. They were mostly Muslims. They were an urban community mainly based in Gujarat and other western parts. Apart from Gujarat, they had some settlements in Ujjain and Burhanpur. The Bohra merchants like Mulla Muhammad Ali and Ahmed Ali had assets of millions of , rupees. Among Muslims, other merchant communities operating on the western coast were Khojahs and Kutchi Memons of Gujarat.

South India:

In the southern part of the sub-continent, various merchant groups played prominent roles. The Chetti was one such group. This term is derived from Sanskrit Shreshthi (Seth). Perhaps the Chetti were very wealthy merchants. The merchants along the Coromandal coast up to Odissa were known as Kling.

The Komatis were the merchants belonging to a trading caste. They mainly worked as brokers for textiles and were suppliers of various products from hinterland to the port towns on southern coast. They were mainly Telugu speaking.

Like the Chetties another merchant group called Chulias were also divided into four sub-groups. Of these, the Marakkayar were the wealthiest merchants dealing in the coastal and South East Asian trade. This was a very mobile group and many had settled in Ceylon, the Maldives, Malacca, Johore, Javanese coast, Siam and Burma. In India, they were most active in South Coromandal, Madura, Cuddalore, Porto Nova, Nagole, Nagapatnam, Koyalpatnam etc. They mainly dealt in textiles, arecanuts, spices, grain, dried fish, salt, pearls and precious metals.

Chrutian Paravas were active in trade from Coromandal to Malabar and Ceylon. They specialised in coastal trading and brokerage.

Among the Muslims, the Golkunda Muslims were involved in overseas shipping. They were prominent in south of Madras and were the main merchants in Bay of Bengal region. The Mopilla Muslims of Indo-Arab origin were also important merchants in the region. Some Gujarati merchants had also established themselves in the Madras region.

Foreign Merchants:

We get a large number of references to the presence of foreign merchants in almost all commercial centres of the period. Of these, the trading activities of Europeans were prominent.

Among other foreign merchants, the Armenians were the most prominent. They dealt in all sorts of commodities from textiles to tobacco. They were settled in Bengal, Bihar and Gujarat. The Khorasanis, Arabs and Iraqis also frequented Indian markets.

2) Moneylenders and Sarrafs

In large parts of Northern India, the traditional merchants played a dual role as traders as well as moneylenders. In villages we hear of traditioinal Baniya lending money to individual peasants to pay land revenue. In towns and bigger places also merchants acted as moneylenders.

Another category among the personnel of trade which played a significant role was that of the sarrafs. They performed three distinct functions:

  1. as money-changers;
  2. as bankers, and
  3. as traders of gold, silver and jewelry.

The first two functions need some elaboration. As money-changers, they were considered as experts in judging the metallic purity of coins as well as their weight. They also determined their current exchange rate. According to Tavernier, “In India, a village must be very small indeed if it has not a money changer called “Cherab” [Sarrafl, who acts as banker to make remittances of money and issue letters of exchange”.

The sarrafwas also a part of Mughal mint establishment. Every mint had a sarraf who would fix the purity of bullion. He also verified the purity of coins after minting.

As bankers, sarrafs would receive deposits and give loans on interest. They used to issue bills of exchange or hundis (discussed later in this chapter) and honour the ones issued by others.

3) Brokers

Dallals or brokers as specialised mercantile professional trading group seem to have been active in the wake of the Turkish conquest of North India. They worked as middlemen in various commercial activities and transactions. With increasing inter-regional and foreign trade they became crucial. Merchants from foreign lands and distant regions heavily dependent on them. The foreign merchants, who were unacquainted with the centres of production, pattern of marketing and language had to depend on the native brokers for their trading transactions.

The need for brokers in India was mainly due to

  1. centres of production for the same commodities were scattered all over the country;
  2. individual output of these centres was small (some centres specialised in particular commodities only), and
  3. larpe number of buyers competing for the same commodities in the same markets.

We get innumerable references to the transactions done through broker. The English East India Company records refer to brokers being employed at their different factories. Fryer (late 17th Century) says that “without brokers neither the natives nor the foreigners did any business”. Ovington (1690) also commented that “For buying and selling company’s goods brokers are appointed who are of the bania caste and are skilled in the rates and value of all the commodities”.

We hear from Manrique (1640) that there were around 600 brokers and middlemen at Patna. Their number might have been much larger in bigger commercial centres like, Surat, Ahmedabad, Agra and other coastal towns.

Indian brokers were to be found in foreign ports also. They were operating at Gombroon (Bandar Abbas), Basra, Bandar Rig, etc. Sometimes, the whole family worked as brokers in partnership. Bhimji Parak, a prominent broker, had a joint business with his brothers. He had 8 shares, Kalyandas 5, Kesso and Vithaldas 4 each.

A. Jan Qaisar divides brokers into 4 categories:

  1. those employed by companies or merchants,
  2. those who worked for several clients,
  3. those who worked on an adhoc basis as broker-contractors, and
  4. state appointed brokers at commercial centres to register sale and purchase of article.

The brokers operating independently can be divided in various groups on the basis of their areas of partnerships. Some dealt only in one specialised commodity like silk, saltpetre, cotton, textile, indigo, etc. Others dealt in more than one commodity. Some worked as sub-brokers or under brokers for a well-established broker.

Brokers’ fees or commission was not strictly fixed. It depended on the commodity and the efforts of the broker to strike the deal or the labour involved in procuring the commodity. In ordinary dealings, the brokerage was two per cent of the value of transaction. One per cent was charged from each of the parties (buyers and sellers). Brokers who were in regular employment were paid fixed salaries and also some commission in some deals. We do not have much information on their total emoluments. However, a few references in English Company records show the salaries of their brokers between Rs. 10 and 38 per month.

Besides helping their clients in procuring and selling goods, the brokers played a key role in the organisation of production. Most of the money advanced (dadni) to the artisans were made through brokers.


Various commercial practices employed in trade and commerce of this period were following:

1) Bills of Exchange (Hundi)

During this period hundis or bills of exchange became an important form of money transaction. Hundi was a paper document promising payment of money after a period of time at a certain place. To begin with, the practice started because of the problems involved in carrying large amounts of cash for commercial transactions. The merchants interested in carrying cash to a particular place would deposit it with a sarraf who would issue a hundi to the merchant. The merchant was to present it to the agent of the sarraf at his destination and encash it. This started as a safe and convenient method of transferring money. In due course, hundi itself became an instrument of transaction. It could be presented against a transaction. It could also be freely bought or sold in the market after endorsement.

According to Irfan Habib “the negotiability of hundi led to a situation in which large number of hundis were simply drawn and honoured against other hundis without the intermediation of actual cash payments”. In this process, it became a medium of payment.

The use of hundi was so widespread that even the imperial treasury and state were using it. In 1599, the state treasury sent Rs. 3,00,000 to the army in Deccan through a hundi. Tributes paid by Golkunda (Rs. 10,00,000) and Ghakkar Chief (Rs. 50,000) to the Mughal Emperor were also transferred through hundi.

We get quite a few references where provincial officials were instructed to transfer the revenue through hundis. Even the senior nobles would take the help of the sarrafs to transfer their personal wealth. Muqarrab Khan, the governor of Bihar, when transferred to Agra, gave Rs. 3,00,000 to the sarraf of Patna to be delivered at Agra.

Many big merchants also issued hundi. Such merchants and sarrafs had their agents at important commercial centres. At times, members of one family (father, son, brother, nephew) worked as agents for each other. Big firms had their agents even outside the country.

A commission was charged by the sarrafs on each hundi. The rate of exchange depended on the rate of interest prevalent and the period for which it was drawn. The period was calculated from the date of issue to its presentation for redemption. The rate fluctuated as it also depended on the availability of money at the time of issue and maturity. If money supply was good, the rate would drop. In case of scarcity, the rates rise. According to Irfan Habib, “a sudden spurt of payment in any direction might create pressure upon the sarrafs for cash at one place, while leaving more in their hands at another, a situation that they could rectify by discouraging remittances from the former to the latter and encouraging reverse remittance by modifying the exchange rate”.

To give you a rough idea a few rates are provided. In normal times 1.5 per cent was charged for hundi from Patna to Agra and 7-8 per cent from Patna to Surat. For the hundi drawn at Ahmedabad for Burhanpur 7.25 % was charged in 1622.

2) Banking

The sarrafs, apart from issuing bills of exchange, also received money for safe deposit. This was returned to depositor on demand. The depositor was paid some interest on his deposits. The rate of interest payable to depositors kept changing. The rates available for Agra, for 1645 and Surat for 1630 works out around 9.5 % per annum. The bankers in turn would give money on loan to the needy on a higher rate of interest. We get a number of references where state officers gave money from treasury to these bankers and kept the interest with them. Tapan Roy Chaudhuri writing about the Jagat Seth of Bengal says that “their rise to financial eminence was partly due to the access they had to the Bengal treasury as a source of credit”.

Sujan Rai (1694) says that the sarrafs who accepted deposits were honest in dealings. Even strangers could deposit thousands for safe keeping and demand it any time.

3) Usury and Rate of Interest

Money lending for personal needs and commercial purposes was an established practice. Much of trading was conducted through the money taken on interest. Generally the sarrafs and merchants both indulged in moneylending. Sometimes the moneylenders were called Sah, a distinct category.

The loans were taken for various purposes. The money was taken on loan by peasants for paying revenue and repaid at harvest. Nobles and zamindars would take it for their day-to-day expenses and repay it at the time of revenue collection. Moneylending for business purposes was also very common.

The rate of interest for smaller loans is difficult to ascertain. It depended mainly on the individual’s need, his credit in the market and his bargaining power. Tapan Roy Chaudhuri shows that peasants took loans at a high rate of 150 per cent per annum in Bengal in the eighteenth century. For commercial loans, the rate of interest differed from one region to another. Our sources generally refer to interest rates per month. Irfan Habib says that the rate of interest expressed for the month suggests that the loans were generally for short periods.

The rate of interest for Patna in 1620-21 is given as 9 per cent per annum, while around 1680 it seems more than 15 per cent. At Qasimbazar (Bengal) the rate of interest in 1679 is given as high as 15 per cent per annum while the rates for the corresponding period for Madras (8 per cent per annum) and Surat (9 per cent per annum) were much less. The rates at Agra and Surat during the 17th century ranged between 6 and 12 per cent per annum. On the Coromandal coast much higher rates (18 to 36 per cent) seem to have prevailed.

The English factory kept a vigilant eye on the interest rates and would supply money to their factories in various regions after taking loans from the places where interest was lowest.

The difference in interest rates in various regions suggests that the integration of financial market had not taken place.

3) Bottomry

A number of uncertainties and risks were involved in long distance sea voyages. These uncertainties gave rise to a new practice called ‘avog‘ or bottomry. It was a type of speculative investment which was quite popular during this period. In Bottomry money was lent at high rates ranging between 14 to 60 per cent. The money was lent to be invested in a cargo for a particular destination. The rate of interest depended on the risks involved. The lenders were to bear all the risks of voyage.

4) Partnership

In partnership, the merchants pooled their resources to carry on trade. Some persons formed joint ventures for overseas trade. We hear of two nobles, Nawab Qutbuddin Khan and Nawab Qilich Khan having built a ship and taken to trading jointly during Akbar’s reign. Banarsidas described his partners trade in jewels during 1611-16. Even brokers at times carried their joint ventures. In 1662, two brokers Chhota Thakur and Somiji of Surat, bought a ship (Mayflower)in partnership and fitted her for a voyage.

5) Insurance (Inland and Marine)

Another important commercial practice prevalent in India on a limited scale was that of insurance or bima. In many cases. the sarrafs used to take responsibility for the safe delivery of goods. The English factory records also refer to the insurance of goods, both inland and overseas. At sea, both the ship and the goods aboard were insured. The rates for insurance are also quoted in factory records. By the 18th century, the practice was well-established and widely practiced. The rates are also available for different goods for different destinations. The rates for sea voyages were higher than goods going through land.


The taxes were charged by the state on trading activities. The merchants were also charged customs and toll taxes on movements of goods. However, the income from these sources was very small as compared to land revenue.

Since towns were the centres of commercial activities, the administrative officers there looked after the smooth conduct of trade. The maintenance of law and order and providing peace and security were important for better business environment. This was the responsibility of the kotwal and his staff in the towns.

The rules and laws governing the day-to-day business were generally framed by the business community itself. Merchants had their own guilds and organisations which framed rules. We get references to such organisations in our sources. In Gujarat, these were called mahajan. In the first quarter of the 18th century, we get evidence of 53 mahajans at Ahmedabad. The mahajan was the organisation of traders dealing in a specific commodity in a particular area irrespective of their castes.

The term mahajan was at times used for big merchants also probably because they were the heads of their organisation. There were separate caste based organisations also.

The most influential and wealthy merchant of the town was called nagar seth. Sometimes it was treated as hereditary title, Nagar seth was a link between the state and the trading community.

If there were certain disputes among the merchants, the mahajans resolved them. Generally their decisions were respected by all. The Mughal administration also recognised these mahajans and took their help in matters of conflicts and disputes or to seek support for administrative policies.

The merchant organisations were strong and fought against high-handedness or repressive measures of the officers of town and ports. We get a number of references where traders organisations gave calls for hartal (closing business establishments and shops) against administrative measures. The huge loss of revenue made administrators respond to the protest. One such serious conflict arose in Surat in 1669. Here a large number of businessmen along with their families (a total of 8000 people) left Surat to protest against the tyranny of the new governor. They settled at Broach and sent petitions to Emperor Aurangzeb. The trading activities in the town came to a halt. The Emperor quickly intervened and the problem was resolved. In 1639, Shah Jahan invited Virji Vohra, one of the biggest merchants of Surat, to enquire into the grievances of merchants against the governor of Surat. During the war of succession among Shah Jahan’s sons, Murad raised Rs. 5,50,000 through Shantidas, the nagar Seth of Ahmedabad. After Murad’s death, Aurangzeb owned the responsibility for paying it.

The merchants in spite of huge resources (Virji Vohra is said to have left an estate of RS 80,00,000 at his death) did not take much interest in politics.

While merchants kept away from court politics, the nobles did venture into trading. Many big nobles used their official position to corner the profits from trade. Shaista Khan tried to monopolise a number of commodities, especially saltpetre. Mir Jumla, another prominent noble, was a diamond merchant. A number of subordinate officers at local level also indulged in business activities using coercive methods.

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