Historical Background of Credit in India

Introduction

The concept of credit has existed in India for centuries. The earliest evidence of credit in India dates back to the Vedic period, which is between 2000 and 1400 BC. During this period, there are references to loans being made between individuals and groups.

Early forms of credit

In the early days, credit was often provided in the form of grain or livestock. This was because these were the most common forms of wealth in India at the time. Loans were also often made in the form of money, but this was less common as money was not as widely used as it is today.

The role of bankers

Bankers played an important role in the development of credit in India. They were responsible for lending money to individuals and businesses, and they also helped to facilitate the exchange of goods and services. The earliest bankers in India were called shroffs. Shroffs were merchants who specialized in lending money and exchanging currency.

The British Raj and the development of modern credit

The British Raj had a significant impact on the development of credit in India. The British introduced a number of new financial institutions, including banks, insurance companies, and stock exchanges. These institutions helped to make credit more accessible to a wider range of people.

The post-independence era

After India gained independence in 1947, the government took steps to further develop the credit market. The Reserve Bank of India was established in 1935, and it played a major role in regulating the credit market. The government also set up a number of development banks to provide loans to farmers, small businesses, and other sectors of the economy.

The current state of credit in India

Today, the credit market in India is well-developed. There are a number of different types of credit institutions available, including banks, non-banking financial institutions (NBFIs), and microfinance institutions (MFIs). Credit is available to a wide range of people, including individuals, businesses, and farmers.

Multiple choice questions

  1. Which of the following is not an early form of credit in India?
    • Grain
    • Livestock
    • Money
    • Land
    • The answer is Land. Land was not a common form of credit in early India.
  2. Who were the earliest bankers in India?
    • Shroffs
    • Goldsmiths
    • Moneylenders
    • All of the above
    • The answer is Shroffs. Shroffs were the earliest bankers in India.
  3. Which of the following financial institutions was not established by the British Raj?
    • The Reserve Bank of India
    • The State Bank of India
    • The Industrial Credit and Investment Corporation of India (ICICI)
    • The National Bank for Agriculture and Rural Development (NABARD)
    • The answer is ICICI. ICICI was established by the Indian government in 1955.
  4. Which of the following is not a type of credit institution in India today?
    • Bank
    • Non-banking financial institution (NBFI)
    • Microfinance institution (MFI)
    • Investment bank
    • The answer is Investment bank. Investment banks are not common in India.