Question -
Answer -
Indigenous banking system played a prominent role in lending money and also in financing domestic and international trade with the help of currency and later with the letter of credit. As the banking system developed, people began depositing precious metals with individuals who were known as Seths. Money became the means which manufacturers can use to produce more goods. Later, documents in the form of Hundi and Chitti were used for carrying out monetary transaction. In ancient India, for trade promotion, the intermediaries played a prominent role. The financial security offered by them helped in taking risks in foreign trade. The institutions such as of Jagat Seth also exercised great influence during the period of Mughals and later in the time of East India Company. The availability of loans and rise in credit transactions helped in growth of commercial establishments.
India enjoyed a great balance of trade with exports holding the upper hand in comparison to imports. This system helped manufacturers, traders and merchants in getting funds for expansion and development. Industrial and Commercial banks evolved to become finance trade and commerce, agriculture banks which provided short and long term loans to finance those involved in agriculture activities.