(IV.) Goods which, or the documents of title to which, are
deposited with, or assigned to, the bank as security for such advances,
loans or credits.
(V.) Accepted bills of exchange and promissory notes endorsed by the payees and joint and several promissory notes of two or more persons or firms unconnected with each other in general partnership.
(VI.) Fully paid shares and debentures of companies with limited liability, or immovable property or documents of title relating thereto as collateral security only where the original security is one of those specified in sub-clauses (I.) to (IV.), and if so authorized by any general or special directions of the central board, where the original security is of the kind specified in sub-clause (V.) provided that such advances and loans may be made, if the central board thinks fit, to the Secretary of State for India in Council, without any specific security.
(b) The selling and realization cf the proceeds of sale of any such promissory notes, debentures, stock-receipts, bonds, annuities, stock, snares, securities or goods which, or the documents of title to which, have been deposited with, or assigned to, the bank as security for such advances, loans or credits, or which are held by the bank or over which the bank is entitled to any lien or charge in respect of any such loan or advance or credit or any debt or claim of the bank, and which have not been redeemed in due time in accordance with the terms and conditions (if any) of such deposit or assignment.
(c) The advancing and lending money to Courts of Wards upon the security of estates in their charge or under their superintendence and the realization of such advances or loans and any interest due thereon, provided that no such advance or loan shall be made without the previous sanction of the local Government concerned, and that the period for which any such advance or loan is made shall not exceed six months.
(d) The drawing, accepting, discounting, buying and selling of bills of exchange and other negotiable securities payable in India, or in Ceylon; and, subject to the general or special directions of the Governor-General in Council, the discounting, buying and selling of bills of exchange, payable outside India, for and from or to such banks as the Governor-General in Council may approve in that behalf.
(e) The investing of the funds of the bank upon any of the securities specified in sub-clauses (I.) to (III.) of clause (a) and converting the same into money when required, and altering, converting and transposing such investments for or into others of the investments above specified.
(f) The making, issuing and circulating of bank-post bills and letters of credit made payable in India, or in Ceylon, to order or otherwise than to the bearer on demand.
(g) The buying and selling of gold and silver whether coined or uncoined.
(h) The receiving of deposits and keeping cash accounts on such terms as may be agreed on.
(i) The acceptance of the charge of plate, jewels, title-deeds or other valuable goods on such terms as may be agreed on.
(j) The selling and realizing of all property, whether movable or immovable, which may in any way come into the possession of the bank in satisfaction or part satisfaction of any of its claims.
(k) The transacting of pecuniary agency business on commission.
(l) The acting as administrator, executor or trustee for the purpose of winding up estates and the acting as agent on commission in the transaction of the following kinds of business, namely:
(I.) The buying, selling, transferring and taking charge of any securities or any shares in any public company.
(II.) The receiving of the proceeds, whether principal, interest or dividends, of any securities or shares.
(III.) The remittance of such proceeds at the risk of the principal by public or private bills of exchange, payable either in India or elsewhere.
(m) The drawing of bills of exchange and the granting of letters of credit payable out of India, for the use of principals for the purpose of the remittances mentioned in clause (l) and also for private constituents for bona fide personal needs.
(n) The buying, for the purpose of meeting such bills or letters of credit, of bills of exchange payable out of India, at any usance not exceeding six months.
(o) The borrowing of money in India for the purpose of the bank's business, and the giving of security for money so borrowed by pledging assets or otherwise.
(p) The borrowing of money in England for the purpose of bank business upon the security of assets of the bank, but not otherwise.
(q) Generally, the doing of all such matters and things as may be incidental or subsidiary to the transacting of the various kinds of business hereinbefore specified.
The business which the bank was not authorized to carry out or transact was set out in Part II., which stated:—
The bank shall not transact any kind of banking business other than that specified in Part I., and in particular:—
(1) It shall not make any loan or advance (a) for a longer period than six months, or (b) upon the security of stock or shares of the bank, or (c) save in the case of the estates specified in clause (c) of Part I., upon the mortgage or in any other manner upon the security of any immovable property, or the documents of title relating thereto.
(2) The bank shall not (except upon a security of the kind specified in sub-clauses (I.) to (IV.) of clause (a) of Part I.) discount bills for any individual or partnership-firm for an amount exceeding in the whole at any one time such sum as may be prescribed, or lend or advance in any way to any individual or partnership-firm an amount exceeding in the whole at any one time such sum as may be so prescribed.
(3) The bank shall not discount or buy, or advance and lend, or open cash-credits on the security of any negotiable instrument of any individual or partnership-firm, payable in the town or at the place where it is presented for discount, which does not carry on it the several responsibilities of at least two persons or firms unconnected with each other in general partnership.
(4) The bank shall not discount or buy, or advance and lend or open cash-credits on the security of any negotiable security having at the date of the proposed transaction a longer period to run than six months or, if drawn after sight, drawn for a longer period than six months.
Provided that nothing in this Part shall be deemed to prevent the bank from allowing any person who keeps an account with the bank to overdraw such account, without security, to such extent as may be prescribed.
The setting up of the Imperial Bank of India was an important step forward for India, and the results could not but be far-reaching. As the Government of India said in placing the scheme before the Secretary of State, the mere appearance in districts of a bank which would conduct the Government's Treasury and Public Debt business, and as to whose stability there would be no doubt, must in course of time have an appreciable effect upon the native attitude towards banking in general. Whether it would be successful in attracting large deposits from the hoards of wealth that are said to exist in India remained to be seen, but, at any rate, the other native banks would now have behind them a powerful central institution to which they could look for guidance, upon which they could rely for assistance, and which no doubt would form a necessary adjunct for the development of the various classes of banking in India, agricultural, industrial and joint stock banks. The internal trade of the country, too, could but benefit by the extension of branches which it was the declared policy of the Imperial Bank to set up.[1]
We may now turn from a consideration of this most important development in Indian banking to a similar stride forward in South Africa, in the establishment of the South African Reserve Bank, which received its charter under the South African Currency and Bank Act of 1920.
Like the Imperial Bank of India, it was to be a private institution, half the capital being subscribed by the banks doing business in the South African Union in proportion to their paid-up capital and reserve funds, and the other half provided by public subscription. If the applications from the public fell short of the 50% required, the balance would be made up from public funds. The bank was to be established first at Pretoria.
The affairs of the bank were to be managed by a Reserve Board consisting of eleven members, three being men experienced in banking and finance, and three (actively engaged in business at the time of appointment) representative of commerce, agriculture and industry. Three others were to be appointed by the Government. A governor and deputy-governor (who must be persons of banking experience) were to be appointed by the Governor-General and to hold office for five years. The person selected for the seat of the first governor was Mr. W. H. Clegg, who, prior to his appointment, was the chief accountant at the Bank of England.
Like the Federal Reserve system of America, the object of the new South African banking system is to consolidate the financial system of the country by centralizing the existing bank reserves. Further, the keeping of balances of other banks at the Reserve Bank will have the effect of making the central institution the sole custodian of the banking reserve of the country, a feature which is evidently modelled from the English system. The reserve regulations make the expansion of the note issue dependent on trade demands, and when the system is properly functioning it is expected there will be a much greater elasticity of the currency than formerly in South Africa.
For a period of 25 years from its inception the bank will have the sole right of issuing notes within the South African Union. The other banks are not ignored; they are given time to make arrangements regarding their own note issues; they will be allowed to continue the issue of their notes for 12 months, and if the Reserve Bank is then in a position to issue its own notes, they will be called upon to retire their notes gradually, and when all had lapsed (within two years,
- ↑ Cf. Economic Journal, June 1921.
