SAVINGS BANK
The first Government Savings Banks were opened at the three Presidency
towns of Calcutta, Madras and Bombay in 1833, 1834 and 1835,
respectively. These Banks were announced as intended for the investment
of the savings of "all classes British and Native," the return of the
deposits with interest being guaranteed by Government. Between 1863
and 1865 the management of the Savings Banks was transferred to the
Presidency Banks, and each Presidency framed its own rules. The first
deposits were limited to Rs.500, and upon the balance reaching this sum
it was invested in a Government Loan. The limit was gradually increased
to Rs.3000 with interest at 4 per cent, but, as it was found that many
people deposited the maximum amount at once, a rule was brought in
prohibiting the deposit of more than Rs.500 a year in any one account.
In 1870 District Savings Banks were instituted in all parts of India
except Calcutta and the Presidencies of Madras and Bombay. The limits
for deposits were fixed at Rs.500 a year with a total of Rs.3000 and
interest at 3¾ per cent was fixed. In December, 1879, revised rules
were drawn up for District and other Government Savings Banks, the
most important change being that the limit of a deposit account was
raised to Rs.5000 and interest was fixed at 4-1/6 per cent. The result
of these rules was to attract to the Savings Banks a large number
of deposits which should have gone to other banks, and in 1880 the
monthly limit of Rs.500 with a maximum of Rs.3000 was again imposed and
interest was reduced to 3¾ per cent.
The proposal to establish Post Office Savings Banks on the lines of
those which existed in England met with great opposition, especially
from the Comptroller-General. The same arguments were brought forward
which the opponents of the Post Office Savings Bank Bill in England
used when Mr. Gladstone managed to get this wise and beneficial measure
through both Houses in 1861. In 1882 the first Post Office Savings
Banks were opened in every part of India except Calcutta, Bombay and
the head-quarter stations of Madras. In Madras, savings banks could
be opened by the Director-General, provided they were not within five
miles of a head-quarter station. The immediate consequence of this
measure was an increase in the number of savings banks in the country
from 197 to 4243. The minimum deposit was fixed at 4 annas, and
interest was allowed at 3 pies a month on every complete sum of Rs.5;
it was also arranged to purchase Government Securities for depositors.
The end of the first year's working showed 39,121 depositors with a
balance of Rs.27,96,796.
On the 1st April, 1886, District Savings Banks were abolished and the
balances transferred to the Post Office, but the Local Government
Savings Banks at Calcutta, Bombay and Madras remained in the hands of
the Presidency Banks until the 1st October, 1896.
In 1904, when the balance at the credit of depositors exceeded 130
millions of rupees, the Government of India began to be rather
nervous of being liable to pay up such a large sum at call without
any warning. A sudden rush of depositors to withdraw their savings
would tax the resources of Government to the utmost and, in order to
afford some protection, a rule was made that an extra quarter per cent
would be paid upon deposits, which were not liable to withdrawal until
six months' notice had been given. Needless to say, the bait did not
prove attractive. The additional interest meant practically nothing to
small depositors and was poor compensation to large depositors for the
inconvenience of having their money tied up for six months. What the
measure did involve was a great increase of work and account-keeping
for little or no purpose, as the number of accounts subject to six
months' notice of withdrawal never exceeded 3 per cent of the total.
These accounts were abolished in 1908 and, although the Government of
India does not keep any special reserve against the balance in the Post
Office Savings Bank, the depositor has the satisfaction of knowing that
his deposit is guaranteed by the whole revenue of the country.
The history of the Post Office Savings Bank in India is rather
monotonous. With a single exception it has been one of continual
prosperity and expansion from 1882, the year of its commencement, to
1914. The balance on the 31st March, 1914, was over 231 million rupees,
and, as the money belongs very largely to small depositors, who can
demand immediate payment, the bank is placed in a very responsible
position towards the public. It will, therefore, be of advantage to
examine the political and economic crises which have occurred in this
period, and how they have affected the small depositors' confidence in
the Government of India.
In Appendix D is given the number of accounts and the balance year by
year from 1882 to 1914, which shows that in no year have the accounts
failed to increase in number and only in 1897-8 has the balance at the
credit of depositors declined. Yet during this period three important
crises occurred. The first was in 1885, and was known as the Russian
Scare, the second in 1896-7 when India was visited by the worst famine
on record, and the third in 1907-8 when a great wave of sedition and
discontent spread over the country.
Two of these crises were political and one economic, and it is a
remarkable fact that the effect of the former two was felt almost
entirely, and of the latter very largely, in the Bombay Presidency.
This circumstance goes to prove that the inhabitants of Bombay are more
in touch with the affairs of the world than those in other parts of
India.
The Russian Scare of 1885, culminating in the "Penjdeh Affair," led
to very heavy withdrawals from almost all the more important savings
banks on the Bombay side. No less than Rs.2,93,000 were paid out to
depositors in the Presidency Savings Bank from the 1st to the 22nd
April. The withdrawals in March from Ahmedabad, Kaira, Broach and
Surat totalled Rs.2,80,000 against Rs.1,10,000 in March, 1884, and
the excess of withdrawals over deposits for the whole Presidency in
January, February and March amounted to Rs.9,50,000. The rest of India
was not affected by the scare, in fact the total number of Savings Bank
accounts increased by 38,000 and the balances by Rs.59,00,000 despite
the heavy deficit in Bombay.
The crisis of 1897 was purely economic and was due to a widespread
famine and abnormally high prices. Its effect was felt in the Savings
Bank for three years, the balance falling from Rs.9,63,00,000 in 1896-7
to Rs.9,28,00,000 in 1897-8, and not reaching Rs.9,64,00,000 until
1899-00. The Bombay Postal Circle accounted for Rs.30,50,000 out of the
Rs.35,00,000 deficit in India, the other deficits being in Madras, the
North-West Provinces and Oudh, and Bengal.
In 1907-8, as I have already mentioned, the country was full of
unrest. Leaflets calling on the men to mutiny were being distributed
broadcast among the Indian regiments. Several Sikh regiments were
supposed to be seriously disaffected. The feeling in Bengal against
the British Government was being carefully nurtured, but the real
head-quarters of the anti-British movement was Poona. In 1908-9 the
balance of the Savings Bank increased by Rs.5,00,000 only, which meant
a serious set-back considering the way in which the Post Office was
developing, but the figures for the Bombay Postal Circle are peculiarly
instructive. The number of accounts actually increased from 264,558
to 271,604, whereas the balance at the credit of depositors declined
from Rs.4,41,00,000 to Rs.4,30,00,000, the actual decrease being
Rs.11,46,388. Now in this year Bengal showed an increase of nearly
Rs.2,00,000, and the decline in the proportional rate of increase in
India was found to be due to the heavy withdrawals of some depositors
in Bombay. There is reason to believe that a number of wealthy persons
belonging to the commercial class use the Post Office Savings Bank in
Bombay as a convenient place to deposit money. This class of depositors
numbered 12,198 in 1907-08 and 12,503 in 1908-09, which is larger
than in Bengal. Such people do not deposit their money from motives of
saving or thrift, but merely take advantage of the convenience which
the Post Office offers as a safe place to keep, at interest, money
which can be immediately realized. The rule which permits a depositor
to have accounts in his own behalf or on behalf of any minor relatives
or any minor of whom he happens to be the guardian has opened a way to
great abuse of the system. There is nothing to prevent a man having
any number of imaginary relatives and opening accounts in all their
names. He can deposit the maximum in each account, and naturally in
times of crisis or when money is tight the Savings Bank has to face
the immediate withdrawal of all these amounts. As one example of what
is done, a case came to light some years ago in which a depositor
at Dharwar was authorized to operate on eighty-three accounts with
a balance of nearly Rs.30,000. He was a broker by profession and it
was quite possible for him to control a balance of Rs.2,00,000 in the
Post Office, if he wished to do so. Further inquiries made at the time
elicited that one depositor at Bijapur controlled forty-two accounts,
another at Surat thirty, and another at Karwar nineteen. Such persons
are really speculators and are a danger to the Savings Bank, and it
would be interesting to know what proportion they hold of the total
deposits in the Bombay Circle. These deposits represent a very high
proportion of the total in India, so that the action of any strong body
of depositors in Bombay has a very serious effect on the balance of the
Savings Bank.
The examination of transactions for the thirty years previous to
1914 has this satisfactory result that, with the exception of the
undesirable element in Bombay, a political crisis, at any rate, seems
to have no marked influence upon the great mass of depositors in India.
The number of depositors on the 31st March, 1914, was 1,638,725 with
a balance of Rs.23,16,75,000. The outbreak of the war with Germany,
however, had a disastrous effect on the Savings Bank balances. When
the announcement was made that the German Government had temporarily
confiscated the Savings Bank deposits in that country, a regular panic
ensued and within a few months about 100 millions of rupees were
withdrawn. The action of the Government of India, however, in meeting
all claims in full did a great deal to allay public fears, and a
certain amount of money came back later in the year, but the balance on
the 31st March, 1915, had declined from about 231 to 149 millions of
rupees. Since then there has been a gradual recovery, and the balance
on the 31st March, 1918, was nearly 166 million rupees. The recovery
would have been much quicker but for the large sale of five-year cash
certificates in 1917-18 on behalf of the War Loan. The price received
was about 100 million rupees, of which a considerable portion was
withdrawn from Savings Bank deposits. At the same time the small
depositors were busy purchasing cash certificates with money that would
otherwise have been put into the Post Office Savings Bank. Now that the
War is over and the rush for cash certificates has ceased, there is
every prospect that the Post Office Savings Bank will shortly regain
its former popularity.