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lenc rue.; aka 2',21;Arel Jnse-pue J04 LAIst +se tio w2 XupTiott jtwrs 1.1in Wiwi{ '4 '1494017TE? tisT suctuti As ;no-cq.osiluo3 isnuew 4u0PuP451141 .10i1.6.4 qi '3 rb3 Ts Eit;_ ,sAsp Aci:d wia4. e 2 1.:c94 -pep jet -aco-c LIBRARY MAY 10 1919 FEDERAL RESERVE BANK May 9, 1919. 14 dear blackett: As you know, some of us are interested in a plan to promote legislation by our %;oni.eeese se that we rte; have some eort of a definite system of budget for our ?ederal Government. 'r!e are trying to stimulate 1111111110111116Naft* public interest by newspaper and magazine articles and by other methods and I am wondering whether you would be willin4; to write an article for one of our best magazines on this subject. We would like, if possible, to have about 1500 words, dealing particularly with the working of the budget aestem in en gland, emphaeizinc how it has saved money, also, historically, l.ow it came to be adopted, and that under your system no restraint is to be imposed in the aevelopment efemeTressive legislation such as old age pension, health insurance, and similar measures which have already been adopted in ngland under the system of executive budget. It would be of great advantage to us to have something in the article to indicate how the operation of the budget, readjusted to meet war conditions, has been of assistance to Great eritain's financial program. If this is aaxing too much of you, please don't hesitate to say so, but I scow the article would be of value and am confident that if you can spare the time you will be glad to help us out. sincerely yours, Basil P. Blackett, .84.1 23 All street, how York. Be/LB a My dear Blackett; I was greatly disappointed in not having opportunity to have A little visit with you before your sailing for home, but 1 playing golf diligently and recovering from the loan effort. You are most kind to be willing to prepare that article. We shall value it highly, and it will be of real service to this country, where you have been a sojourner for so long. It looks as though we were making good progress toward budget legislation, and I know you will be glad to feel that you have had a share in bringing it about. Whenever the article is ready, send it along to me and I will ree that you ale sul.plied with copies after publication. .pith kindest regards, I am, Jincerely yours, Treasury jhambers, Whitehall, London 6.'4.1, :gland. B:i/a3B F 1-466 London, Se2tamber 16, 1919. Dear Sir: letter of the 15th instant enPlease acce:t my thanks fc>r your closing coe.y of knnua., Re,:ort of the Indian Per Currency Department for 1916-17. Very truly yours, The Under Secretary of State for India, Financial De artnent, India Office, S. W. 1, London. V a June 3, 1921 -y dear Blackett: I have yours of Hay 19, with the ouestionnaireo on statistical information. t.. Jr- I have forwarded yoistnoto to 1:ashinf7ton and will advise you of any reply Choy may wish to make,. But I will dray your attention to tho fact that practically every item about which you inouiro in published every month rogularly in And I ohould say that thio infornation the Federal Roc:erre Bulletin. It would bo no different if was as official an anything you could get. eamo through the ;tale ;)ooart-lont or any other. it Tho only itel I note with is not :ivon exactly ao you wioh it This, in thio is the nonthly statement of tonnago of foreign trade. country, in givem only for a certain nukber of items, Where the qunntitioo aro rAvon ao well an tho valuoo. From these quantity figuros tho Federal R000rve Board nakoo uo an estimate of the rolativo quantity each month, *doh is also pub.. liohed in the Federal Reserve Bulletin. you probably know, 71r. Hoover is ondoavoring to inprovo the statistics yo have as to domestic trade and production, and the Federal Aooerve Board and the individual banks have been working along the nano line, so that you could easily have not only all you ask for but a ;Teat deal more. Kindly advise no in whet furthor way we any oervo you, and believe that it rill always boa pleaouro. sincerely yours, BrILT A: MI 71110IIC 9 Governor non. Been P. Blackett, Treasury Mambers, nitehall, London, nagland. a June 29, 1921. Dear Sir: Your favor of rdy Z1, with the accompanying documents, reached me sometime ago, and I regret the delay in acknowledging thsa, due tJ my repeated absence from New York. Will you not accept my thanks for this courtesy, and convey Lhe same to Sir Lail Elckstt? Yours very truly, Arthur Sweetser, Esq., c/o Office of the League of National London, England. BS tad a June 29, 1921. My dear Blackett: About five years ago I purchased 1.500 3f Aar Savings Certificates. it 6001118 astonishing how fast tine flied, when I find that these certificates fall due on August 4, 1921. Can you tell me if they are still being issued, and if so at that price, and whether I should seed them over to be collected, or whether on the contrary it would be better to urcha.:e BDTO new ones in their place: I take thie opportunity also to thank you for asking Mr. Sweetser to send me the interesting report of the committee which investigated the Austrian problem. I have not yet had time to finish its reading, but hope to do so shortly. Trusting that you keep well, and with kindest regards, Faithfully yours, Sir Basil Blackett, The Treasury, London, England. BSOLM misc. 35 FEDERAL RESERVE BANK OF NEW YORK 3 Sent by (SEND TO FIL TELEGRAPHED IN CIPHER iA`oii, Lowe o &AID. ,E; ;AactiLt 17, 19 1. Pk,' 1 B :1 1 A4 MISC.3.1-90,011-20 FEDERAL RESERVE BANK OF NEW YORK r FROM ACE CORRESPONDENCE .07 Snyder DATE September 2 SUBJECT Governor Strong agree with you that it is desirable not to turn down Mr. Blackett's request, but at the same time we must regard the views of the Department of State. *Mr. Gilbert will be here to-day and I shall have a word with him before deciding what to do. 1921 September 13, 1921. My dear Rldckett: Ov:ing to continued absence from the office I failed to acknowledge your kind letter cf July '!" with regard to the War Savinss Certificates which I wrote to you about. I have decided to allow them to run for another five years with the expectation as you say of having them repaid at ve for each !_5/6 originally invested. It ioak very good of you to look into this matter for me to dive me the neesesary informa- tion concerning these certificates. With my best wishes and kind personal regards, believe me, Yours sincerely, `)v,c Basil P. Blackett, Tne Treasury, London, Enl and. GEIMM January 8, 1923. Dear Blackett: This is my first learning of opeortunity to send you a eersonal line since your acceptance of the finance memnership in the Viceroy's -aouncil. Of course, I have known soeething most interesting, work. It certainly is a of it since visiting Hai ley, and frankly can well understand the lure to one of your active mind and disposition which such an oprartunity will afford. Since I was in India in 1920, your predecessor has been good enough to keep up a correspondence with me which Sae been most interesting, and given me such a good picture of India and what was going, on there that I hope you will be willing to do the same. clalet ?sr. Stanley Baldwin and Borman Last Thursday your former Wadsworth and I !feet them down the Say. where they the Majestic. were honored by a visit from more newspaper representatives and camera men To...day they start ne,rotiatinn the funding_ than i have ever seen on shipboard. of the deot. he are all hopeful of the results. hullo the temper of public opinion in this country would not yet eupport anything like intervention on the pain., of our Gevernment in political matters in Europe, there nevertheless has been a strong swing in favor oF' e more conetructive policy in economic arrived on matters than at any time since the war ended, which is t. helpful background for such a difficult transaction as they now 1:eve to oon.luct. I ae, afraid, however, that the decision of the wrench Government to occupy the Ruhr has chilled public opinion a good deal as to eonclitous on the Continent, and l think oolitical obligations solidified public opinion that anything in the nature of of the strongest influenaes upon public One in Europe are not to be thought of. opinion just now has been the growing realization by our farmers that we produce 10 or 15 per cent. more farm pr. cluots than our own neople can eoneume; that Europe is the principal maraet for them, and unless that market is capable of taking what we produce at fair prices, the farmers have 2.ot to curtail aroduction. Tais applies especially to cereals and meats, as cotton exports have been pretty well maintained, and prices have been good. have felt i must take this opeortunity to express the appreciation I I hear frequentfor the litany eindnesses that you have shows ihy boy pen in Adencion. ly front him and he has more than once mentioned being with you and Ledy ala.caett, and of the hospitality you have been good enough to show nim. While a cold has keit me away from ousinese recently, been Happy New Year, I am, Yours sincerely, Sir Basil P. 31aokett, Delhi, India. 38.MM i have otherwise pretty well and sincerely hope that you have been. Wishing you the greatest possible success in your new work, and a very No. 2. June 19, 1924. ltrefore, it set-Pid to me that it was worth ecme effort and expanse to it started. 1 would much appreciate your writing me as soon as your many duties may happen to leave you 9. few spare minutes to do so. Tith many good wishes to you and to my other friends in India, I am, as always, Sincerely yours, Sir Paoli P. Hackett, Delhi, ES.MM July 10, 1924. 14 dear Blaekett: Today I had the pleasure of a call from Mr. Denning and his wife . Unfortunately, they came just before I was obliged to keep an engagement for luncheon and just before a week-end which I Loi planning to spend in the country. As they are sailint, next Tuesday - and this is Thursday - very much to my regret it will not be possible for me to show them any courtesies during their stay in York. This I greatly regret on your account and eopecially on my own as I should like to nave the time to learn nose about my good friends in India and how things are going with them. They hapoened here in a very hot season and I fear their impression of New York *ill be one of discomfort. It is sood of you to send them to me, dad I only regret my inability to show them something in the way of hospitality. with kindest regards, believe wee. Tours sincerely, Sir Basil P. Blackett, Delhi, India. P. S. 1 had a fine Letter today from Hailey, and dm propoeilv to write to him as well as to you in the near future and give you nomethin2 of an account of what is going on over here. Sir Basil. P. Blackett 2 7.14.24. ilk The Democratic nationel convention resulted is a deadlock between Ihe real issue developed to be one of McAdoo acid Governor dmith of Wes ork. great oiLternees, - a supposed cisorimieation again et the Homan Catholic And .aly after religion, for watch Governor anith was the standard bearer. two weeks of exhausting effort in a very hot convention hall both parties withdrew and John W. Davis was nominated by a land slide. It's the beet He ig a fine, able men, and the general feelnon; nation they could have made. ing is tlat whether he or Coolidge becomes Presineat for the next four years, From now on interest will center upon the country will be in safe hands. the primariae, where about one-third of the eenatore, end all of the represeetaIt looks an though tives are nominated preparatory to the thvember election. the general dieeatisfaction throughout the country wit the performancep of ContTeee durlee_ the ease few yeAre will result in a turf) over, eel it ma: no We certainly will see many new faces that we shall see a radical Congreee. there. I em aorry to learn by your letter that you have hied a really serious illness, but I an reassured by what you .erite thet you are all yell mein. I have a long letter from 1111ey, and I hope he will be hap.. in his fellow, and T em new aeeelnteeet es Governor of the Punjab. He te e very fond of him. Won't von remember ma to any of my frieede with whop' you are assooieted whr! -7T111 sae them, and give my warmeat regards to 1,ord ReedinF. The seine to your good self. Faithfully yours, Sir Basil Hlaekett, Delhi, India. B6.1i36 August 2C, 1924. My dear Blackett: You are certainly very considerate and helpful in connection with that literature, and it would be real contribution if you are atle to inake it possible for me to get just the documente which you have in wino. I am koknowledging your letter at once so Etb to make sure that you undereL.and my appreciation. My son Ben is very happily married, and after a yehrs experience with Schroeders in London, he is now in New York bagging away at the tAnking business. I hope you keep well and happy and that all of your ;Manx and affairs art meetin6 success which they eurely deserve. Sincerely, Sir Basil P. BlacLett, Simla, India. BF.IIIM September 11, 194. My dear Blackett: It was very good of you indeed to take an interest in the conics on Indian finance, et. I think it will be a good plan to have some such repository of information on India as we shall then have in Princeton. will be known to other Universities throughout the country and etudenTA3 will undoubtedly avail of it. I am most grateful to you for your help. Possibly Mr. Denning explained to iou that he and his wife happened in on me just as I was leaving the city and only a few days before they were sailing. I was so disappointed not to be able to entertain them, show them something of New York, and make some contribution to the enjoyment of their visit. Next time you send folks to me with a letter of introduction I sure- ly hope to have better luck. I seem to be in first rate health and bm just about to leave for a month's holiday in Colorado *hie. this time will be spent entirely in loafing. With many good wishes, I am, Yours sincerely, Sir Basil P. Blackett, Simla, India. A 1"."(,9 My dear altickett: /CI ve a only yeeturday that I wiee,01e, o rot, It the Bud.eot 'speech taF:t you were good enough to Zond Sc, 1 did eo with great ec:miration red appreciation of tne work which it represents; but more especinlly, my dear 3lackett, knotty for the fine spirit in shish isu tivproach a 'riot ouch I woult anjoj a visit kith you and learn problem. something of your work! enjo:ed e visit from your friend, Mr. Shirrs, 6o tar and hope V.:let be derived some benefit from his trip. eis I could tell, everyone gave rid the needzd time for dieicvestigntion, and we were aed to do so es we all cueeion found him a most likeable fellow, indeed. months, Zs you way StirMit'S, a:tve been The last much devoted to the subject of 'old. From here it looks as though the transition from a slowed to en open markat has been accomplished with little friction 82.01 herdship, end probably with success beyond Norman's skpeotatione. I ehell hope to 'ce over ta-Lre in July .ant le2 IT1 more on the ground. Kith every good wish to you, believe me, oincerely yours, Sir Beall F. Blaczatt, Finance Member of the Council, Inrde, BS. LS September 17, 194E). My dear Blecketts My very enterprising friend, the librarian at Princeton University, hae written to remind me that I wee undertaking some time ago to get a collection of Indian official documenta for C.le Princeton library, which resulted in my bothering you. It Beene that when your friend, Dr. Shirrae, was here, he visited Princeton and ea b. result of conferencee there, they have something under uty which will neceeeitate reference to a cwaber of these f!ocumente, and they have asked and ithether there ie a chance of their being obtained. hate to bother a busy fellow like you, but it etteme that I cannot well avoid it. You must net beeitete W let M6 not if this is going to be tn inconvenience or expense, which I am not justified in asking. T. I just got off the etnamer lest nitht after two monthe spent abroad, much of the time with our old friend Normen; and I wish my desk were not so occupied with wl,t3re needinz attention ea *Ai prevent my But I shall try tc do so later. writing you domething of my trip. with menu kind *Janes, believe me, :sincerely yours, Sir Basil P. Oleckett, Finance Member of the Council, Simla, India. January 21, 1428. !iy dee r Blacketto Your letter of December 3 fortuettely arrived *bile Norman wee here, so ee her op,ortunity to diecuse It together, end it resulted after conei .erable deliberation in nur aenning you Jointly a conlicnmtial cable vie London, confirmation of which is enclosed herewith. I teet: written Professor Coyajee, but din not eand his 120 Hupeee, as I gathered from your letter e:v: his that the amount of the expense incurred 4tA) I shall bend cam still uncertain, Lee he would let as know the &mount later. whatever id needed %hen I near the amount. If you will accept the 1'01 owNow about your gold standard nrogram. ing comaenta in the very humble epirit in which they are offered, and underetend them to come :roe one who pretends to heve no expert knoeledge of Indian monetary affairs, I shall regerd tnem ee containing the poeeibility of help with the oinimum poelAbility of harm. First let me say that I have always hart a feeling that the Indian sterling exchange standard with the use or silver kg the monetary unit of India, had clearly dieclosed the weakness that it could be sada to protect India eguinet either e rise or a fall in the price of silver, but it WrI.6 not succeeeful In its In fact, I neve always felt that the Indian position would ability to do both. All be in some peril until the time CAMO to get antler...1y on the gold standard. of the urguoemts are clearer to you then they are to me, with the intimate experience you have how had with the Indian currency, enr: I only with to pass on to you a few reflections on the difficulties of the amerce. For years, centuries almost, the 500 million neople of Indic have been In recent years, I gather that the annual net imoortation accutuluting silver. may run around 75 million ounces, at these reaching 100 millions or even more; srldle and curing the extraordinary war period, Innis toot practically the entire production of 200 million ounces a year, either directly as new production or indirectly through the Pitmen Act silver, which has later been replaced by the This great United states Line nnent in its Airchase of new production silver. horde of silver, partly in ornaments, partly in rupees, is the 'Jeering* bank of In a general way, I suppose when the :rice of silver declines, the Itn:ien India. Nhen it advances in relation to gold, tney people buy more silver. dispose of ogee or their silver and buy fold; but there is, nevertheless, a constant additdon to tee total fund. Your progrem sill contemplate making known to the world that India sill no longer continue to tAu !'rom 75 to 100 million ounces year, but, in tact, in coeree of time sill dienobe of 150ble 500 million ounces, which is eeuel to three One need only .go beck to the days when Germany abandoned yeerso world production. eir Basil P. eleekott 1.21.28 bi-metelliem to realise *..het this *ill cut the vales, of eilver doer treeendously in world markets. So the first query which omens to xa is 6e to the affect eeo the mines oe the Indian population of levering the intrineic purcheeine power of their silver reduced in value. How much coined silver will to tendered to the eoveinment? hoe much ailver metal will be offered for sale? That feeturo of the programs is ail h mystery to me; it depende such ueon the psychology of the Indite% eeople, ea moll as upon the tbility of the Indian Government to ectuelly deal with tee err/ilea of marketing e vtet etore of silver which it not he on nand or which is held by trio public. Of course, the imect upon Brice es a result of this glove sight be seoeswhet leseened if some very coneieereble part of the 'store of silver cen 111 coined into a token coin et ea low en intrincic value, teat it would not to exported. But the euestion ia, how sauce currency of that character can India. absorb, wed would it ebeorb any conuieerable tsount with the intrinsic value eo reduced? It must oleo be borne in mind that the use of silver for subsidiary coinage been very much reduced teroughout the world, in iect, almost universelly throueeout Europe, bad the British shilling lite been reduced from 925 to 500 fine. This hats thrown u greater burden upon silver producers by restricting their market. In feet, the Lest and erincieally Indic, ie now almost lee only coneieerable :eerket for woaetery silver. Of course, it at once occurs to me on ream ding your letter to estimate the pceeible reaction in this country. Iu order to somewhat inform myself bud to eive &orison a first-Ilene picture, I took ehe liberty of asking Mr. John D. Byrn and Yr. Cornelius Kelly of tee Anacouda Copper Compeny to eiecuse the wetter very oonfidentielly eite ue. Mr. Kelly le now ereeieent of LAO eilver Producers Aseocietio o? tole country. Abet he tells ut is most disconcerting as to your progrem. In the first piece, the silver produced from the purely eilver since of this country eye only be treeted in conjunction with twee eixed ore& Weich contain other nonferrous metals. The other metale principally eseocieted eite silver are copper, lead tnd zinc - lead end zinc being the east iskeortent. The efeect of losing the Indian market for silver could be to add roughly 2 cents a eound to the coot of cope for those cites Lich wive silver production as well. &see of thee eoule he oblige to close. For the lead and zinc industry it would be r celerity. but it 'would really extend beyond tett. The refining is _Urge', conducted by refineries in New fork, New Jersey, Maryland and clone the Atlantic seaboard. reeve incuetries soald be ,:ieo seriously efected. The lose or the Inditn merket they believe, woul clone the (silver minee of Ceneds, United etttee bUtl Mexico (except the moat proritebl would close twee copper einoe, and would greatly increase tne coot of lead and zinc, sad effect the tributary induatriee, pertleuierly refinine. It eoule raise a. political question or the first order. All of this le loading up to the ',unction show you frankly end neceseeril: reise as to assistance in carrying outs proves oe adopting the gold etan&rd. You estimate that it would reeuire 100 millions sterling of gold, which you naturally feel *meld need to he furnished by Loneon end New fort. Overt period, I belie no doubt teat this could be arreeete, so far as aecuseury Cinenciel erreegemente eo, but I fear the conseeuencee of a progress ceiling upon the reeerel Esserve eyetem or American beekere to join in financing a eonetury reorgenizetion in Indite the oleect of wtich would be to throw tens of thousends eosseibly hundreds thousends of people out of employment end seriously cripple or destroy two or three important industries in this country. eir &AI P. Bl ceett 1.21.28 Ot CQdrtk:, India ali these yeare lash Then there is /mother eit..ieelty. had rvoreble belancea ol cayeesete and has been % steedy ccumuleeor of the precious 4e might eseute that e erogrem could be laid out metals in eayment tor eJeorte. for a=doption of the gold etanderd bilged ueon the ebility or the Indian Government But ever, if that rare done, regularly to ecquire the .oath Africse production. I think Norman feels that other Oostende for gold arising ' :nom ell emertere of the forld, ehich is liable to be of uuueual eeteet in counoction with mane for he resumption of gold payment, could have to bo zat by tmfts on London, tad it might indeed be too severe e entrain upon his reserve. On the ehole, my confausiOu is that hoeever doeireole your progrem may be, strictly from the etandeoint of India and its monetary effeire and ite gradual upbuilding economically, there ere enters of reising tsetse° pith e strong eoliticel caueing antagonisms which ciennot be overlooked, end 'mice indeed sight euelity defeat them program entirely if it depended uion easietence fro2 uo. I cm firmly convinced that the euld etteiderd erogree is tee beat yet devised, end tett it le tee one to or to ultimately, but I oo pot yet believe that it can be eucceeefully otrried out at present in Indic without reactions in England sac America, which mieht have ter-reaching, even dieeetroue, coneeeuences. I have arranged to get some fieures from Kr. Kelly, which eheuld nerve been in my hands today, but not bting receivec end te I e leaving for h month's ebeence on Friday, I shell prepare tide letter in tee hope Chet I nen incluoe the figures eeparetely liter. You eey you sill be interested to hour whet I think of you, tar. I ma honestly *soy, my deer Bleckett, that I teink es .ouch of you is ever - reteer more, Indeed, I might it: fact, nor rriting me so fully and frenely about your proeodele. equilly reply that I shell be greatly intereuted in hearing, stet you thick of me efter reeding this rather hastily erepered reply. Vita tensest regerde, I b' to resale, eincerely yours, eit Been. P. Bleckett, Finenciel Umber of Council, Delhi, India. 3;r. Lt June 27, 192?. Deer Elackett: 4 evte efther heard from you or written It is e ion,' time An you. The excuse on my part ie let .'ieptember 'hie. put me on o e that the e'.cuee on your part is .:Iirope f for about seven soothe. I wurnise amount of work with whieh I know you are confronted just an not. compl el n. greatly appreciate hearing from are viricino in organizing, 4,11neee after returritni:; from mat I would ectiy Peomethine. of the pro,r,reeF you under the ttres of the Hilton Young Conmission report, end eepecielly something of the difficulties which you appear to be -xperiencine ov-r the declining valor, of the rupee. In a way you were responsible for th,.t. visit of ninn to Landon, and I must tell you one or tao foutainL incidents in connection with ivy appearance before the Cormiseion. My old friend, Sir Noroot Marren, referred to our correspondence prior to tt,e Ce.1.1.reiou hearini.:b in London in which he nrid that you had told Me of your long letter to me, end that he had naoe a consent that ''.out:tlese you your tongue in your cheek when you f,rote it. said your retort wee that you had a very nice letter from e in reply, wh,:reupon hie cement was that if be knew anything Ll.re.ng probably Strong elan heed hie tongue in hie cheek when he wrote the answer. The fact is, ay old friend, the whole enterprise ra originally laid out gave me quite s bed turn. The re, 80,16 for thn way I felt were so fully bet out in my etotere,nt and thope of Sprague and Hollender, thf t further comment 1P unnecessary. After thr; hei..rini.-s one day your friend, Sir Purshotendes asked me if I would he interested to know what inpreesien my eteteesent had made upon the Inc:leo either* of the Cormiseion, which he explained by handing to a slip of 1.aper ehich 'ee bac peed to lelc.rren at the hearing e haa eritten the folloei.e6: on which hha haw "fall your friend, Pleckett, thet hie friend, Strong, nee buried his i,o1d etanderd echese with tn.ternational honore." At the foot of the blip I:erten hr.:, uritten, *end a damn .eood job too." I had some very Intrestine experiences with the naaeers of the Gowiseion, none sore illusineting than a long talk *Jell :,iz Purehetandee. Fe apprrently wee deed eat tqatnet the is. bd. vtaut...40u, :;,1%.fti&OCA: to se euite frankly thet he thouvht the Indian excht:nge bee neon menipteloted that le. e e . was an artificial vilue, end if they could attopt Is lie. it egoeld recto re to enployere in Incite some part of the extraurcauary weee; inorceses 4i ch heti 1:eem sore or ices forced upon then by the Government e.e.: which they could not readjurt by any other method then the one seiggeated. I teei'e the poeltion conntatently, (and without the a1i6hteet. irnowleabe of what Norman had teetified) that the adoption of Ivey vele° for the rupee suet be 'zeeed upo$ the feote, thet in, whether India had edjust3d to the value of Is 5d. :Itch had erevalled for awes eighteen soothe, or Vihttli.ir I. ILLs, in feet, e vise isn i ch had any artificial element in it. On that :subject ke had no informa- tion and could sake no etetesent except in general terra, Lilat Lrbitnr: retdjuatinenta of the vnlee of the our: envy were undeeirsele if they eoull be aecided. I never expected Sir Purehotesdas to .,rite a Whinority report, but I had expected that :sir I. D. Dadebhoy sight potion:1y do eo. Inogice ny betonishment, then, when Sir Purshotuee.es prOUUCCit bua ell CltW4Ve and almost violent obiection. Of eoures, you know that I seraly atatoti al oonviotiune to the Cos a/Arlon aceirewith to be helpful, and I hope in the loud rue that proves to be the outcome. You will find the record of key etetement with irarnings ageinat ettempting to apply h beetint, eyet.en which is eulteblu to the United Eitetes, where conditions differ so reeterielly es they do in Indle. The South Africen reeerve bank It ouffrt.ng no from the coneequeneee of m ettempt to r'0 that very thing. If I were e free lance it would be tremendously intereetin,7, to me The next beet is to visit you in Indio end talk over SCV 5 of the. e tbliniee. to hear from you stout then by letter, co pleeee write me if you hA's time. It is F1 long time since I have heard from Heiley, let me know how he is snd, if you think he would be interested, paee this letter alone. to him. I hope he keeps well. I hope biro tbtt you lied Ire. Bleckett are yell and proeperoue end peppy. Pen, as you knov, is married, he e. lovely if en a boy, also Ben, over two veers Things here rock *long abut -e ueuel. end prosperous. Our Treasury this year hove The oountry is waxing fel eurpluo revkaue of about t600,000,0f).0 end will rae:uce the funded debt by over e pillion dollars. is mighty intereeting to at to watch this eituetinn develop. It Of th::, five big war loess of which, roughly, eomethinF over one half eve sold by our organization in New York, the fifth hee been entirely retired, a nothnr, the second, ie in course of retirement end will be fully repaid or rofanded at the end of this year, and another, the third Liberty Loan, fella cue and will be partly peid off end the balance refunded 1-7 September of next year. It has been en extraordinry reoord. The wealth of the country end the induatry and savings of the people hey* done most of it, tut se have he a very mice. secretary of the treasury who is emtitled to much credit. arrives here next zePlt with Schacht, end re ere also '.0 V Ja.nu :.ry 25, i928. Der Your letter of December '1 has t.rrived during 11r. aron 'r illness. He hse asked ii A. to write )ou and to tell he is looking, forwrArd pith pleaeLre to reading it, but that probably he mill not be able to reply to it for zone :.;tee. After nine won 1..1! b oontinJoue good health and LA:broken bu,dnese activity lir. Z-Iror4; he L h. recurrence or his old trouble. However, this has been very slight - no cos:parable to his 1 st attack - and we have every reason to bc,,ieve that he will be tack in the office se fit a.e ever in a couple or weeks. I oin enclosing a copy of your letter, anti have retFaned a copy for Mr. Strong. Very truly yours, Secretar-y to Mr. Strong. Sir Eaeil F. blackett, Delhi, India. S ku ust 10, LI . My dear Bssilt It deems most ungretefUl that I should have so long dei-y suitable answer to your fine letter of December 21. It arrived at a time when I was seriously ill, and from that time until the present I Ft have teen obliged tc neglect a great many matters, inaluding much of my I am not even certain E,t the moment whether you are in India or have returned to England, so sr ending this to the Indio. Office where moil. they will know your address. Evan nova cannot wend you much of a reply, as I am only a few days tack from birope and must skimp my working Lime still for the bene- fit of health. in this letter is the hope re great deal of asaafaction. I COIL I especially wish to coil fey- that polr work in India has given you ;mow that you ' ve tiOrkett much, in th - fee of opposition and obstacles of a very stabt,orn and difficult oht:raoter but, aftt.r all, that lends interest to the bark and creates the incentive for its accomplishment. liata I coon eble to go tc Eland on this trip I could have looked you up, were you there. If and when you receive this letter I hope you will writ( me something of your plans, and whatever they may he I sincerely hope that it. means prosperity and happiness for you. Sincerely yours, Hon. Basil P. I31ackett, a/o The India Office, Downing Street, Longon, EtIg land. (ti cf4 CY,J72 /17,/ c9it do 4.3 yr)-1,/, 44- c: t-t al 4- 9 t t mslaza 4=somamessomecuteisftrAllialmirAftWakbatanielbrni11000100111. 1 THE IIEVEBTH GM:NAB WAII subscribed as much as one half in new money. After a month of very vigorous propaganda. the subscription lists of the 7th German Tier Loa', closed on October 18th. A few days later the pro -isional results were published showing that a total of -P622,900,000 had been obtained, apart from subscriptions from over-seas and from armies in the field, for which the licts remrined open till Vovember 20th 1917. These will no doubt briny the total up to £024;000,000 ufl compr:red with a final result for the !Axth '2:ar Loan of r656,100,000. The total .um raised by the seven wrr loans amounts to r.3,639,800,000 with an annual interest charge of r182,000,000. The following table shows the results of the war loene to date. 4rot Loan (17eptember 1914) (final figures) 224,050,010 Second Loan (Larch 1915) (final figures) 455,300,000 Third Loan (September 1915) 608,150,000 " In 1915 1,063,450,000 Fourth Loan (March 1916) (final fieures) 538,400,000 Fifth Loan (Se3.tember 1916) 534,900.000 " In 1916 Sixth Loan (March 1917) (final figures) 1,073,300,000 656,100,000 Seventh Loan (Veptember 1917) (provisional figures) 622,900.000 In 1917 1,279,010,000 Grant Total 3,639,800,000 Thus the Seventh Loan falls rather more than !'30,000,010 Aort of the Sixth Loan, but iv, about £15,000,000 larger than the (2) Third Loan. The German papers have regarded it as a greht *success, and have emphasized with oonsiderrblo Netification the fact th?t the low internal condition of the country, owing to the Chancellor oriels, could hrrdly be considered frvourrbl for the floating of a big loan. To date Germany has covered out of her total Vot© of Credit expenditure of "4,700,000,000 by means of nanded war loans r_3,G39,800,000 or 77.44%. It must be remembered, however, thIA her war costs are continually swelling and that her last two Votes of Credit have each been for f750,000,000. There is a growing surplus of expenditure whioh cannot be met by means of wrr loans. It is not known what total has been reached of Treasury bills outstanding but there is every reason to believe that it is well over ..(1.,000,000,000. The inflation of the note issue is also increasing. very rapidly. The subscriptions to the complicated Treasury Bonds five once win kept within very modest proportions, re can be seen from the comparison with previous loans :Fourth Fifth Loan Lour' 5 per cent Loan 4i per cent. Treasury Bills Sixth Loan P1,000. Seventh Loan P1,000. 4'1,000 e1, 000 457,150 478,925 587,896 557,865 78,450 53,660 68,207 65,032 Further, not more than 5,770,000 of old war loan stook was offered for conversion into the new 4, per cent. security. (3) 110It is evident that those 130n as, which the Germane claim "carry their own redemption within then" are by no means populsr and will not do much to lessen the anxieties of the financial authorities as to the future. The followinp table shows for the seventh and earlier loans the distribution of subscriptions received through the various subscribing sgendies :let Loan 3rd Loan 5th Loan 6th Loan 7th Loan 23,950 28,450 34,245 31,200 37,600 144,750 369,550 304,076 377,460 347,300 ings Banks 44,150 143,850 128,375 160,200 159,901 e Insursnce ompanies 10,150 20,850 16,870 19,3n0 19A00 34,000 42,330 65,150 54,600 8,350 6,690 6,800 4,700 223,000 605,050 632,600 648,900 623,200 224,050 608,150 534,960 656,100 chsoank ks and Bankers perative re'tit Astociutions t Office Total ised Tots' including subscriptions from cud and from armies the field The sbove table can be expressed more clearly in the form of percentages: Distribution of subscriptions. (Percentages) 1st Loan genoif e. wbank and Bunkers go Banks Insurance Companies Credit AsEtiln 10.7 64.9 19.8 4.6 3rd Loan 6.7 61.1 23.8 3.4 5.6 5th Loan Gth 'Loan 4 6.4 4.9 58.2 57.1 24.7 24.1 2.9 3.2 7.9 8.4 7th Loan 4 6.0 56.8 26.6 3.1 8.8 viii um RIR 011 "There is a decline in the actual vmounto received threuch all the Fenciev with the exception of the Reichcbonk, where there ie fln increase of F6,401,000. It iv most sur.prisinc, in view of the increase by re much an r48;000.000, in lorge oubscriptiono of over f25,000 (shown in the table immedittely below), to note that both the actual emounts Ind the proportion of the tottl collected through Bvnkc in nankerc should chow a fall, to compvred with the f'ixth Loan, while emll subecriptiara! through Savings Benkr, Life Insurance Companies end Co- operative Credit Asoociationo show e small oboolute decline but r rclf,tive increase. The totvl amount of the ':eventh Joan is :.bout r30toomol les: then the Sixth Loan, the cubcoriptiono over r25,0011, tire 048,000,00o more than in Sixth Loin and yet the oubooriptions through Binks fna Bankers 1*() P30,00,000 less than in the Sixth loon. The increase of !'6,4(-)0,000 oubccribed through the Reichcbenk accounto for only a satIll part of the extra r48,010,000 of very large subscriptions. The only conclusion to be drawn from the firures uu they otend iv thnt there hco been a fulliE0 off in the oubocriptionn made through 3anko and Bvnkerc in amounts of less then f25,000 of nearly P40,000,000. The two following trbies enable r. comporison to be made of the amounts received. from the different 0111;see of vubscribers in the feventh and earlier (5) Loans: AMOURTE,SUBSCRIBED (In thousands of pounds). SubsAptions. First Loan. Third Loan. Fifth Loan. Sixth Loan. Seventh Loan. e e r 1,800 6,600 7,700 14,320 10,400 to 10 m 16- 25 5,550 18,450 14,650 21,860 14,740 30- 50 29,360 42,200 27,600 40,050 26,540 55- 100 29,350 46,400 26,000 35,090 23,060 105- 250 28,950 78,150 45,550 58,470 43,380 255- 500 22,500 60,100 38,400 49,440 40,890 505- 1,000 15,350 42,900 32,550 40,650 34,870 1,005- 2,500 20,500 58,350 49,100 64,850 59,450 2,505- 5,000 15,750 42,600 40,500 53,140 51,190 5,005- 25,000 26,450 88,300 85,500 105,530 104,600 25,000- 50,000 14,350 34,750 42,650 48,080 56,500 50,000 43,450 86,450 122,400 117,410 157,280 ;-'23,000 605,050 532,600 648,900 622,900 r Total iERCERTAGE 0? AMOUT SUBSCRIBED. Subscriptions. First Loan. Third Fifth Sevonth Sixth Lo&n. Loan. Loan, Per cent. Per cent.Per cent. 2pr cent. Percent. Loan. to m r 2 10 15- 30651052555051,0062,5065,00525,00560,000 g 0.8 2.5 13.2 13.2 13.0 10.1 6.9 9.2 1.1 3.2 1.4 7.0 11.4 6.4 19.5 14.6 5.7 14.3 16.1 8.0 23.0 2.2 3:4 6.2 5.4 9.0 7.6 6.2 10.0 8.2 16.3 7.5 18.0 Total 100.0 100.0 100.0 100.0 25 50 100 250 500 1,000 2,500 5,000 25,000 50,000 6.9 7.7 12.9 9.9 7.1 9.6 7.0 21/ 5.2 4.9 8.6 7.2 6.1 9.2 7.6 1,7 2.4 4.3 3.7 7.0 6.6 5.6 9.5 8.2 16.8 9.0 25.2 100.0 It will appear from these tables thet the distribution of uubscriptions in the Seventh loan presents a remrrkuble contrast with the preceding loan. The proportion of large subscriptions is ftr greeter in the present loan, find there is 2n sctusl increase in the rgest subscriptions - those over 71. 50,000 - of nearly £40,000,000 in spite of the fact thet the total subscriptions r re smiler than in the sixth Loan. Letually more than one quarter of the Whole of the Seventh Loan was provided by 1032 subscribers of over 1'50,000. Smell pubseriptions Up to 350 represent only 8.4:; of the totsi as compared with 11.8% in the 3ixth Lon, 9.7 and 11.2'; in the Third. Loen. in the Fifth Loen The increaeing herdships suffered by thoso with umtll incomes would norlly result in a diminution in their esptoity to subscribe to new 7sr Loan issues. The apparent reverssi of this tendency in the Sixth Loan was due in ptrt to unprecedented proprgands which undoubtedly tapped new resources, snd pertly, perhaps, to manipulation of the figures. The above fisures ',hewing the distribution of sub- scriptions are borne out by the following t:bles in which the number snd percentage of subscribers in the different classes is given:- (7) DUMBER OF :AJTTRIBER. Subscriptions. zo First Third Fifth LOUn. LOT r Lot-n. Sixth Loan. Feventh horn. 231,112 904,358 1,794,084 3,844,834 3,233,472 15- 25 241,804 858,259 681,027 1,058,861 693,729 30- 50 463,143 918,595 605,494 893,611 666,623 65- 100 453,143 530,176 301,563 407,538 264,871 105- 250 157,591 422,626 245,073 320,762 233,542 255- 500 56,438 147,593 93,189 122,514 100,781 505- 1,W)0 19,313 54,445 40,671 51,659 42,732 1,006- 2,500 11,564 32,040 26,500 40,463 33,914 2,506- 6,000 3,029 10,090 9,748 13,564 12,169 5,005- 25,000 2,050 7,074 7,870 12,322 9,145 25,005- 60,000 361 832 1,032 1,184 1,363 210 630 725 770 1,032 1,177,235 3,966,4113 3,809,976 6,768,082 5,213,373 er50,000 Total The great increase in the numbers of the very small subscribers in the isst two wrr loFns is due to the inter rive circulition of Vier .(2avings c:rds in the Army and the :schools. Subscriptions of only one merle can thus be mud(' to the loan, and each such subscription if counted goes to swell the total number of subscribers. In the Seventh Loan the number of .small subscribers has fllen off considersbly in comparison with the Sixth Loan a fact which is explained by Germrn newepPpere c.e being pfrtly dole to the decline in country subscriptions owing to the (H of the harvest having not yet come in. furter Seitung admits quite openly thtt the country dwellers have not done es much ra they ought in the my of contributions to the WPr Loan. It is interesting to note thitt aubscribers of between £15 and 4100 fire fewer thnn in the Third, Fourth, Fifth and Sixth Loans. On the other hfind large subscribers of over ,'25,000 are considervbly more numerous than in the Sixth Loan; the greet increase in subscribers of over 450,000 ie spec:I:11y remnrkoble. A table of the percentage of subscribers of different amounts shows nil increase in the percentage of very small mbooribers, due to the savings cvrd rystem, but a considerable decrease in the reletive numbers of subeoribers of amounts between ;115 and rai0. ;fie tables indicnte clef rly that the capacity of the riddle clrsses to subscribe ir becoming exhausted. Tho perceLtage of subsoribers of over '50,000 is exactly the same na in the Pirst Loan. F7YJEUTIGE OF BUBSCRIBEE::. First Loan. :riptior,s. Third Loan. Fifth Loan. Sixth Loan. eventh Loan. 10 10 1525 3050) 55100) 10525() 255500 505- 1,000 1,005- 2,500 2,505- 5,000 5,005- 25,000 - 50,000 .03 3 The Frank- .02 100.00 19.6 20.5 38.5 13.4 4.8 1.6 1.0 .3 .18 .02 .014 100.00 24.8 21.6 47.1 17.9 2'6.2 15.9 13.4 10.7 3.7 1.35 .83 .25 .207 .027 .019 100.00 7.9 6.45 2.44 1.06 .75 .26 .18 .017 .012 100.00 56.8 15.7 11.: 6.0 4.7 1.8 .74 .60 .20 .18 .03 .02 100.00 62.02 1...31 11.25 5.08 4.48 1.93 .82 .65 .23 tt 'I The averge amount contributed by arch subscriber ie greater in the Seventh than in the sixth Loan owing chiefly to the diminution in the nurther of small subscribers and the increase in the very lurgn subsoriptione in the ct,se of the seventh loan. The following trIble shows the aver/)ge subearip- tion in the seventh rind earlier loans : frflDGE'SUBSCRIPTIOBS. First TItrd. ptions. Loan. Loan. Fifth Sixth Seventh Loan. Loan. Loan. t e r 10 7.79 6.63 4.29 4.6 3.22 LL. 95 21.50 21.51 21.10 21.25 64.77 4L.94 45.56 45.11 46.24 87.52 86.22 86.4 87.06 184.92 185.26 185.8 185,75 15- 25 30- 50 55- 100 105- 250 ) e. P e ) ) ) ) 183.66 The greflt increase in the number of subscribers of over 250,000 has reduced the verge hMOUht subscribed in tht. eltIss to e.152,403. The following list nhowr the amounts subscribed by No fi:uree ere again certrin of the larger German towns. available for Berlin and Dfteseldorf which in the third loan headed the list with 2105,000,000 rind e23,400,000 respectively. 3UBSC2IPTIOU BY TOM. OTIS tion 1910 let Loan 1000 3rd Loan 21000 5th Loan Z1000 6th Loan Z1000 7th Loan 41000 22,000 zfurt 415,000 7,400 22,750 19,750 24,800 tgert 286,000 3,700 13,000 14,950 21,450 ? mer 302,000 7,750 14,800 18,000 19,800 ? -erg 931,000 12,501 23,000 17,500 19,775 18,200 h 596,000 5,600 13,550 11,315 15,166 14,000 au 512,000 6,800 13,250 17),785 14,360 13,000 'Tne 516,527 10,400 12,750 len 548,010 4,200 12,730 10,525 10,150 10,500 294,635 3,455 7,352 8,200 9,400 10,050 Sig 590,000 3,600 11,100 6,900 9,050 8,450 :aeim 236,113 2,190 7,412 6,918 8,770 8,000 burg ? 279,629 ? 98,656 Lie 180,843 Dttin 194,000 ? 2,850 6,200 ? ? ? 7,980 6,050 7,800 6,750 7,460 9,600 6,700 6,025 7,500 6,500 The only town in the above list which shows an increase over the Sixth 3.oan in Essen, and amongst the smaller towns also it is mainly the munition °entree, which have increesed their eubscriptione. In the majority of cases the subscriptions are smaller in the Seventh than in the Third Loan. The results of the Seventh Vier Loan tire significant re affording proof of the determination of the Germain people to carry on the war ,Tid as showing that the internal credit of the German Bmpire is as yet not verioutly impairer :. The position after the war is undoubtedly causing S. great deel of anxiety, but so long fF the army is still able to keep victories up its sleeve aed produce them when planted, and co long re it suffers no very disastrous defect in the field, it oes not seem liLely that it will be unable to obtain the funds necm-ery for the prosecution of the war. The facility with which Gorr any is able to raise these great loPns every six months is certainly remarkable, but it must be remembered (a) that the currency is very rapidly being inflated; more than rzoo,00l,000 of notes have been put into circulation since the beginning of 1917, and the total circulation now stands above gd00,000,000, (b) thtt the funds invested in the war loans acre largely the proceeds of the process of liquidation of much of his netional wealth during the war. for stocks of raw materiels and manufactures have been used up and live not been replaced, her reserves of food_ (12) stuffs have been consumed, her soil exhausted, her muchinery end plrnt worn out. The sole opportunity for the investment of much of the liquid capital th11£3 C;!Oeted has been the tier Loons, in which if! now looked up Ft very inree pert of the "replecement fund" which will be required by German industry end commerce f 'ter the vier. The making of these funds available after the wrr is one of the most urgent of the orobleme which the German government will hfve to face t;ftcr the wer. It htls ennounced thf t it 1..roposes to retrain the existing Loan Officec for a oensideruble period fter the war, and to eni ble them, with the rid of the Reichsbrnk and the whole banking- system to rrrnt for egainet wrr loan stock, to en filmost unlimited extent, et n low rate of interest. It is true thr t it is quite poeeible thr t this could be done, but it involves an enormous inflation of the elrendy inflated Germen currency with a corresponding effect in depreciating its value both mt home end ebrord. The aotuul emount of new money received is epprociabl,y less than eppeers from the °Motel figures. The ;-evings banks contribute large sums to the loans but before each new loan their clients ere the 1: rgest sellers of old loan even at s. 10E8. It fells on the Reichebink to meintein the merket for liar 1,oen, and it is the sole buyer on a if rge serle. It tocepts the stool: of old loens rt i-11 below issue price, fnd it buys officially trc much el) r50,000 daily at the Berlin Stock Exchange. However, when the sales ere more buriclent, especially, for the account of the ravings Banks, it does not hesitate to absorb en even ere, ter quantity in order to prevent too much Every obstt;cle is thrown in the way of the public, if it wishes to divpove of War Loin. If anyone is in absolute necessity for money he Ic sent to the Ilar Offioes to borrow on his ':ivr Loan; if he is determine 1i to sell, his ordero rare executed slowly and only for nosy smt.11 qufIntities. Hence in time of vier, gat least, the poesession of 7111 Loan stock iv by no means free from divndvontares; while on the other side, the Reichsbunk is compelled to have ever increasing recourse to II/being offered on the mrket. its note issue in order to maintain the Iv rket for all war loons. (14) ON HIS MAJESTY'S SERVICE. FASTEN Envelope by gumming this Label aoross Flap. NATIONAL ECONOMY. OPEN by cutting Label instead of tearing Envelope. Ben in Strong, Esq., Ritz Hotel, PICCADILLY, a6) Wt. 49369 248 6,9116,900 4.19 W 6 & 1. CONFIMNTIAL. The loans advanced by the Allies* to one another are approximately as follows By United By United By France. Loans to. States. Kingdori. £ £ d Kingdom 800,000,000 e...... 485,000,000 275,000,000 Total. £ 800,000,000 875,000,000 390,000,000/ 35,000,000 700,000,000 520,000,000/: 160,000,000 718,000,000 390,000,000/ i a 38,000,000 um 56,000,000 90,000,000'5 90,000,000 236,000,000 a 4,000,000 20,000,000§ 30,000,000 54,000,000 nia 2,000,000 16,000,000 35,000,000 53,000,000 15,000,000 15,000,000 38,000,000 j , 8,000,000 al Total ... 10,000,000 10,000,000 1,451,000,000 1,668,000,000 365,000,000 3,484,000,000 Excluding loans raised by the United Kingdom on the market in the United States, and loans raised by France on the market in the United Kingdom or from the Bank of England. / After deducting loans of gold to the United Kingdom, from France £50,000,000, from Italy 222,000,000, and from Russia X60,000,000, which are returna'ole when the counter loans are repaid. This allows nothing for interest on the debt since the Bolshevik Revolution. No interest has been charged on the advances made to these countries. MEMORANDUM RECEIVED FROM BRITISH BOARD OF TRADE COTTON. July 16th, 1919 Bales Estimated year's consumption of American cotton at in mills of United Kingdom under pre-war conditions 4,270,000 Deduct one-eighth for reduced consumption owing to shorter hours of working, say Leaving estimated year's requirements for 1919-20 530,000 3,740,000 Notes. 1. The indications are that the year 1919-20 will be a period of active trade for the cotton industry; and no reduction in consumption is to be expected on account of lack of demand. The figure of 4,270,000 bales above represents approximately the consumption during 1912-13, which was likewise a period of active trp,de. There has been no appreciable change since then in the spindleage consumiw, American cotton. 2. Working hours have been recently reduced from 551 to 48. It is improbable that the output of the mills will be diminished by quite as much proportionately, but for the first year, certainly, the reduction will be nearly proportionate. A decline of one- eighth has accordingly been assumed under this head. A Any further communication on this subject should be addressed to -The Under Secretary of State for India, Financial Department, India Office, S.W.1, 10111-and the following reference quoted INDIA OFFICE, WHITEHALL. S. W.1. 7t 1046C Tele. Noe. VICTORIA 8920 TREASURY 4 Ext. 15th September 1919. S Sir, I send you the enclosed copy of the annual report of the Indian Paper Currency Department for 1916-17 at the suggestion of LIr.Blackett of His Majesty's Treasury. It is regretted that no copy is available of the 1917-18 report, i. e. of the latest issue. I am, Sir, Your obedient Servant, Benjamin Strong Esq., Ritz Hotel, Piccadilly, W. For Financial Secretary. COPY 91r, File after showing to Chr. Jy. I have replied BS Treasury Chambers, Whitehall, S.W.1 23/12/19 My dear Strong, This will be too late to do more than hope you have had a Merry Xmas, but It will start with the here are my best wishes to you for the New Year 1920. world in a less hopeful mood than 1919, but I trust sincerely that it will be a less disappointing time for us all. We have been watching your efforts to check inflation in the U.S.A with interest + admiration. We have just taken a very bold step here in fixing a maximum for the fiduciary issue of Currency Notes in 1920. It seemed a good move not because in itself it can do any good but because it improves public confidence in its belief that the Government has a definite policy + if it is to be carried through the decision commits the authorities to a are at last at the peak of our National deflationist policy. I believe Debt + in a position to begin shortly some debt reduction, though pending is still in the future. The Government has a reasonably economical frame of mind for the present + can probably be kept up to the mark, as public opinion demands economy. I am - little afraid that the U. S. A. ,;i11 not give us proper time to effect the improvements in exchange which I aim at. It seems to me not impossible if only American prices could be allowed to rise a little more that we might get ours down a trifle so that the two would meet on a proportion similar to the pre-war proportion + so allow us to get near to reestablishing the gold standard, with gold purchasing about 45% _hat it did before the ,;ar. But if you deflate too fast + your prices go down, we cannot face, socially or politically, the big drop in I am not sure that it would not pay the prices which would be necessary here. to let our rates remain, as they are at least now, well above New York, and then ,hen we have got back to the gold standard come in us partners with us in providing Europe + elsewhere with capital. But perhaps I am over sanguine as to the prospects of restoring the gold standard. Best wishes to Jay + Curtis Yours very sincerely [signed] Basil P. Bluckett a fi V / LEAGUE OF NATIONS. liSOCIETE DES NATIONS. -London. Lay 31, 19:1. Dear Sir, Sir Basil Blackett of the Financial Commission of the League of I;ations has asked me to send on to you as a matter of possible interest the enclosed Report of the Sub-Committee which went to Vienna, too investigate the Austrian problem, and the Report of the full Financial Commission of the League on all the measures which should be taken both by the Allied Governments and by Austria herself, to put Austria back on her feet. Sir Basil feels very optimistic as to the general out- come of the work and feels that already the Austrian situation has been improved by removing it from the political to the technical field. .Yours very truly, Governor Strong, Federal Reserve Bank, YORK Cl2Y. U.S.A. 1111 SEP 13 1921 m s,, 1641 TREASURY CHAMBERS, "%r`ii 11111 'SA BLED In reply WHITEHALL. please quote Regd. No. 12th July,1921. 4 dear Strong, In reply to your letter of the 29th ultimo about your holding of War Certificates; you may make application (on a form which I enclose) for repayment of the certificates at par on their due date or you may allow ,them to run on for another five years at the and of which they will be repayable at 26/for each 15/6 originally invested and therefore for each 20/- due on the 4th August 1921. You will see that the form of application for repayment allows you to be repaid by a warrant payable to any bank you may name; the actual certificates should accompany the form of application. ./e are still issuing new certificates at a price of 15/6, repayable after 5 years at 20/after 10 years at 26/-, compound interest at approximately 5i% per annum is thus payable throughcathe currency Delhi, the 13th February 1923. My dear Strong, I was very glad to get your letter of January 8th. thanks for your good wishes. Many Your picture of the arrival of Stanley Baldwin and Norman gave me just the touch which I have been wanting. Personally, I am well satisfied with the settlement between the British and American Governments in the matter of the Debt (so far as I can understand it from the insufficient reports in the newspapers here). Of course one recognises that from one point of view it simply means that we are paying a war indemnity, but I think it is better so than that matters should be left unsettled to cause irritation between our two countries. I arrived here on January 8th, the anniversary of my first arrival in India, i.e. the date of my birth. So far I am thoroughly disappointed with the conditions of work. Instead of being axle to get ahead and do things which need (.; doing, one has to waste one's time tryingitto obtain authority from the India Office for doing things which are obviously proper and right and obviously ought to be done by the people on the spot without reference Home. The only thing wrong with India at the present moment is the India Office. However we may be able to change all that. Yours sincerely, 7,let "CI Benjamin Strong, Esquire, Federal Reserve Bank of New York, New York. a-te I I ellthr.. he4;tt- 4//z PPz-/-449vt gok td THE GAZETTE OF INDIA EXTRAORDINARY, MARCH 1, 192g. IL-REVIEW OF THE TEAR 1922-23. Deficit as now estimated. 3. The budget estimates of the current year as finally passed provided for a deficit of 9.16 crores, the estimated revenue (including new taxation and increased postage and railway rates expected to yield 181 crores), being 133.23 crores, and the expenditure 142.39 crores. There is a saving of 4.14 crores on expenditure, but revenue will be 12.48 crores less than the estimate, so that as now revised the estimates point to a deficit this year of 17i crores. Revenue. Trade conditions. 4. Our revenue estimates were not based on a hope of any marked or striking revival in trade, although we certainly expected some slight improvement on the general trade conditions of the previous year. On the whole, this anticipation has been justified. There was considerable stagnation during the earlier part of the summer, but, except perhaps in the cotton mill industry in Bombay, the general feeling prevailing in the business community has for some months been one of mild optimism. Considering the impoverishment of many of our former customers, our exports have undoubtedly shown a promising recovery, and, so far as merchandise alone is concerned, the balance of trade in favour of India during the first ten months of the financial year has been 62 crores which contrasts with an adverse balance of 29i crores in the corresponding ten months of the preceding year. As Customs. against this, there has been a substantial net import of bullion in the current year, but after including the bullion figures there still remains a net balance of 20 crores in favour of India instead of an adverse balance of 33 crores in the first ten months of last year. 5. Under Customs we budgeted for a total net revenue of 451 crores, of which 9 crores was expected to accrue from the enhancement of duties imposed in the We now expect a Customs revenue which will be some 3 crores short of the figure budgeted for. The most uncertain, and at the same time one of the most important factors affecting our revenue is the import of sugar, which in the previous year had yielded us the unprecedenfedly large figure of Finance Act of March last. 62 crores at the old rate of duty of 15 per cent. For the current yettr we did not anticipate the continuance of such abnormally large imports, but expected, on the increased duty of 25 per cent., to realise about 61 crores. The figures of imports vary in a very erratic way from month to month which makes estimating difficult ; recently, owing to a large drop in prices, imports were held up in order to get the benefit of the revised tariff valuation which came into force from the 1st January. We expect, therefore, large imports in the last 3 months of the year though the effect of this will be counterbalanced by the duty being calculated on a lower valuation. On the whole, we expect that the revenue from sugar will be less by l crores than the budget figure. The excise duty on cotton manufactures will also bring us in substantially less than we expected ; owing to the high price of cotton and a fall in the price of cotton cloth in the internal markets, there has recently been a reduced output from the mills, and we expect to be about 60 lakhs down under this head. As regards the other tariff heads, it is probable that there will be some deficiency in the revenue from liquors, matches, machinery, cutlery and other manufactured articles, but any losses here should be nearly counterbalanced by increased revenue from import duties on cotton piece-goods (which may give us 96 lakhs more than our estimated revenue of 5,60 lakhs), iron and steel and other metals, while the new excise duty on kerosene is likely to bring us in 89 lakhs as against 40 lakhs budgeted for. 6. Before leaving the subject of Customs, I must refer briefly to a matter which has attracted some public attention during the year, namely, our revenue from the so-called " luxury " articles, which are assessed to duty at 30. per cent. Hon'ble Members will have seen from time to time various articles in the press, the object of which was to show that this high rate of duty has very seriously affected the trades concerned, and it was implied, if it was not asserted, that a lower rate of duty would. have brought in more revenue. These contentions are scarcely borne out by the facts. In the current year we budgeted for a return of 2,84 lakhs from the 80 per cent. duty ; we actually expect to receive only 11 lakhs less in spite of a considerable fall in prices. The principal articles included in the 30 per cent. schedule are motor THE GAZETTE OF INDIA EXTRAORDINARY, MARCH 1, 1923. 57 titars, silk manufactures, glass bangles and beads, and tyres and tubes. Except in the case of silk manufactures, the quantities imported during the first nine months of the current year have been in excess of those imported in the corresponding period of the preceding year. Nearly twice as many motor cars have been imported ; and if the value of the cars imported has fallen considerably, this is due partly to the general fall in world prices and partly to the fact that people have been importing the cheaper American car in preference to the more expensive English car. I doubt very much if the duty has had much to do with this substitution. The conclusion is that there is certainly no case at present for any alteration of the schedule. 7. As Hon'ble Members will have seen from the published returns, our traffic ItailwaYs. receipts from railways have been disappointing. The increase in passenger fares was expected to add some 6 crores to the receipts. Traffic, both passenger and goods, especially the latter, has, however, fallen off, and as against the estimated gross traffic receipts of 99-1- crores, we do not expect to get more than 92, the small improvement over the gross earnings of last year being mainly due to the increased passenger fares. On the other hand, we expect a saving of 24 crores on that portion of the expenditure on replacements and renewals which is debitable to revenue, counterbalanced by an excess of about 1 crore in ordinary working expenses. Altogether our net railway revenue is likely to be down by 54 crores. Taking into account interest charges, I am sorry to say that the final result for the general tax -payer will be that there will again be no profit from railways, but a loss of about a crore. 8. The effect of the new postal rates, during the first few months of the financial ,Preolsets 'year, was to reduce correspondence, but there have since been signs of recovery, and the public are now gradually getting used to the higher postal charges. For the present, however, I think we must anticipate a diminution of 1,06 lakhs in our anticipated receipts in 1922-23. There is a small saving in working expenses, and after debiting interest, the department will probably prove to have been running grap at a profit of about 24 lakhs. 9. We expected large arrear income-tax collections, but after the beginning of the Income -tax. year it became evident, not only that the allowances that we should have to retake for bad debts, etc., would be large, but also that our revenue was to be seriously affected by heavy refunds which have had to be made in Calcutta as a result of the adjustment system in force under the former Act ; fortunately this will, under the new Act, not disturb our estimates again. I understand that in Calcutta companies have in many cases actually received a cheque from the income-tax authorities instead of paying any tax to Government, and the net receipts in Bengal are not expected to be more than 31 crores. The collections have been good in the other provinces, particularly in Bombay, though the lower profits which the cotton mills have recently been making will, I fear, affect our revenue from that city in 1923-24. Altogether, we expect a total deterioration of 3i crores. 10. As regards other heads, I need only say that we expect to get 89 lakhs more Opium and Salt. from opium than we anticipated, and there will probably be some slight improvement -7 lakhs or so-under salt. Expenditure. 11. On the expenditure side, there will be a substantial saving of about 1,86 lakhs Interest. in our budget provision for interest on debt. Our rupee and sterling borrowings have been larger than we budgeted for, but a full half year's interest in respect of the greater part of these does not fall due till next year ; the success of our borrowings has, moreover, enabled us to fund a substantial portion of our floating debt. and the payment of interest made for short periods this year on our new loans is less than that which would have been payable for the replacement of the treasury bills discharged. The House will recollect that a special provision of 60 lakhs was entered in the Other Civil estimates-as part of the expenditure in Waziristan (under the head " Political"). expenditure. We now anticipate that there will be a saving of nearly 35 lakhs therein, owing to a part of the expenditure being thrown forward to next year. There will also be a saving of 4 crore in other civil expenditure, mainly as the result of retrenchments carried out during the year. Exchange. Change in method of accounting. Military expenditure. Summary of variations. Succession of Deficits. expect hange -comounts. een to THE GAZETTE OF INDIA EXTRAORDINARY, MARCH 1, 1923. 69 'Iltdr. Punch would say, first depressions. I am afraid that much of what I say may sound rather superficial, and that I shall be open to t been done before by more than one globe trotter who in the country, sets to and writes a book about India. O India which I brought with me to read on boardship o entitled " The Moral and Material Progress Report ". odd assumption in the title that there had necessarily bee look into the finances of India for the last few year whether it was not rather a rake's progress. For five had a deficit. The accumulated total of these deficits crores, and this in spite of the fact that in the last two has been imposed estimated to bring in about 28 crores d Apart from our reve this is not the whole story many crores on unproductive purposes, the expen as capital expenditure. New Delhi is the most obvio justification, other than sheer necessity, for not treatin able against revenue, and in any case it ought to be rep date. Moreover, besides the deficit of the Central Gove of the provincial Governments and of many local bod be forgotten. 16. I ask the House to pause a moment and consider Unfortunately, we are accustomed in these days all ove and familiarity breeds contempt in spite of the fact that is before us among the nations of Europe of the cha deficits inevitably induce. The individual who lives be does not escape the penalty and the same is true of a makes this mistake quickly finds himself compe cutting down of his expenditure or is driven either or the whole of his possessions ; or, in the worst e A State is in the same position, but the position is fr that the State's creditors are in another capacity the c taxpayers. And the State which is driven to cheat i realise what it is doing although its unsound method not only of the wealth and happiness of its own citiz risk to social order within its borders. Much of the pr due to the way in which States in all parts of the world by unsound currency manipulation and the creation o assets behind it. 17. India has not entirely escaped the evils of taxatio compared with many other countries she has come off of 100 crores during the last five years, it is estim covered by the creation of paper money, representi of the Government of India. The remainder amount raised by borrowing. Moreover to the extent of 22 cro taken the form of issues of Treasury Bills to the pub to special conditions during 1922-23, we were able to 32 crores, in spite of the deficit, out of the proceed 22 crores of Treasury Bills in a country like India is fa outstanding.. A large volume of Treasury Bills is an the condition of the money market is such that it is alwa bills by offering a competitive rate, but in India co under which even an impossibly high rate would b case the Government of India would be driven bac Bills by paper currency, i.e., would be driven to taxation 18. In this connection, a word may be said about our have to find the means of meeting bonds during the n extent of 5i crores in 1923, 34 crores in 1925, and near amounts, too, have to be competed for against other d may be said, in part at any rate, to be one of the outcom few years. 60 Increased Interest charge. Effect on India's credit and handicap to her development. THE GAZETTE OF INDIA EXTRAORDINARY, MARCH 1, 1923. 19. But the deficits of 100 crores can be looked at from another point of view, when again their evil effects are prominent. In the budget for 1923-24, the charge for interest would be at least 5-1- crores less had it not been for these accumulated deficits. This extra 5i crores has to be met either by reducing expenditure, possibly by reducing desirable expenditure, or by raising new taxation, or at best by maintaining existing taxes which could otherwise be reduced. 20. Moreover the continued deficits are threatening to impair India's credit in the market both at home and abroad, and increasing the cost of borrowing whether for covering the deficits or for new capital expenditure. India is a country where, as it seems to me, there is an almost unlimited field for new capital expenditure on new development. At the last Assembly of the League of Nations at Geneva, India established her claim to be one of the eight premier industrial States of the world. Every one admits, however, that India is only at the beginning of her industrial development, and it is out of her capital resources, i.e., out of her accumulated savings and her new savings, that the capital to develop India industrially must be found. We have borrowed all that we could borrow in India and in England during the last few years for capital expenditure purposes, and we have undertaken a minimum programme of 30 crores a year for capital expenditure on Railways. I wish it could be more. So far as Ican judge at the present time, the amount which might usefully be spent on profitable development of transportation in India is limited mainly by the.possibilities of finding capital resources. Yet we have spent 100 crores out of capital in the last five years in financing deficits, thereby diminishing to a corresponding extent the resources available for developing India. Let us make no mistake about it. If recourse to inflation is ruled out, if it is agreed that the concealed method of taxation by inflation is the worst of all methods, the money to meet the annual expenditure of India, whether on capital or on revenue account, must come out of the savings of the country. The only exception, which is not a real exception, to this statement is that some of the capital may be borrowed abroad, and it has of course been a commonplace of the history of the last century that Necessity for stimulating habit of Investment. capital has been found by the older industrial countries of the world for the development of new-comers in the field, to the great advantage both of the borrower and of.tbe lender. But the amount that India can borrow abroad is limited both by the amount available abroad, which in the present condition of the world may prove a comparatively small amount for some time to come, and by the capacity of the borrower to meet the annual charges for interest. These annual charges for interest are in effect a claim on the future resources of India and ultimately come out of the same pocket as the money required to meet the rest of India's expenditure, i.e., out of the savings of the people. To sum up, the deficits of the last few years have brought in their train a certain amount of taxation by inflation, a heavy annual charge on the present and future budgets of India, a deterioration in India's credit, an increase in the cost of borrowing, and a depletion of the resources available for desirable capital development. 21. Perhaps I may be allowed to digress at this moment to touch on a subject in which I have always taken very great interest. Every one who has studied the subject agrees that a wonderful era of prosperity would be ahead of India if the habit of investment could be stimulated, if investment in India became anything like as general a practice as it is in such countries as England and France. It is true that much has been done in recent years. The rupee loans of the last few years have been unprecedented in amount. But much remains to be done if the Indian people are to form the habit of investing their talents in reproductive enterprises rather than wrapping them up in a napkin, and perhaps I should also add, if some of them could learn to be content with sound and steady returns on the money they invest instead of looking for impossibly high dividends. 22: I have been making some inquiries as to the progress of the Post Office Cash Certificates. I was an original member of the National Savings Committee appointed in England at the beginning of 1916 largely through the efforts of Mr. Montagu, and was privileged to take a part in what is widely regarded in England as a most extraordinarily successful movement. The change from thriftlessness to thrifty habits which has taken place among many sections of the English people has been described as a revolution. National Savings Certificates to the value of nearly £360 millions are now held by the small investor in the -United Kingdom. When I contrast the THE GAZETTE OF INDIA EXTRAORDINARY, MARCH 1, 1923. At' ces as between one commodity Can we say that the position e a fixed value, whether at 18. erms of some other currency, P I think not. 'f he French pe is faced with the threat of are unstable ; sterling has at par ; and even if it were d monetary conditions in the sing prices in terms of dollars by a rise in sterling prices. For yet come for a new attempt to figure. Strength of Indian Currency Reserves. amely, that the era of unbalanced ceeded by an era of balanced ncy position of India with some India's export trade has taken a ic reserve of silver seems to be er currency. In addition to the rency Reserve a sum of £24 vertible into foreign exchange, outside these Reserves, we have e of the separation between the lable for maintaining the rate of Paper Currency Reserve and the Movements in Exchange. ge during the past year reflect a ear ago, in February 1922, the llen as low as 18. 2-1-14, and it d. Since then, after a rather on, it is for the moment fairly ment in terms of sterling reflects o the rise which has taken place gold, and the improvement is igure for Indian wholesale prices e corresponding figure was 173. es of food grains. This fall in which there has been an actual approximately stationary. has come for fixing on a new nt to make one or two general f instability about any parti- ing else ; it is simply a question ltimately India's payments outrts of Indian goods and services. int of view of the budget, the overnment of India's sterling ts to 360 crores, at is. 5d. it rores, while at 2s. it amounts to d have been saved had exchange Statistics proverbially can be es are striking and it must be sss of the Government of India, palities, port trusts, and many benefited by a higher exchange en, again, although since 1920 ore stable than world prices, or owly, has to a large extent ther internal prices in India ding to a is. 4d. exchange, so rnal prices would have to go 'Wilk t3r6-4-10,u, St"( REGISTERED No. L 848. azdte of EXTRAORDINARY. PUBLISHED BY AUTHORITY. DELHI, THURSDAY, MARCH 1, 1923. 6uVERNIIENT (SF' INI IA. F tNANCE DEPARTMENT. SPEECH OF THE FINANCE MEMBER INTRODUCING THE BUDGET FOR 1923-24. ( 53 ) 64 THE GAZETTE OF INDIA EXTRAORDINARY, MARCH 1, 1923. e Committee are either autonchments which we ourselves advance of the receipt of theaki ommittee cast their shadowlow economy which they created E itent to which has been akecredit credit for the reductions, in Budget tiestaken inretrenchment London, we propose for mmittee's proposals.recommendations. nowledge of the reductions y the Commander-in-Chief, ent Committee and with his al agreement in regard to the dget, we have been able to some though not all of the uence of the recommenda- rations could not be so far s. It was necessary to pree estimates for the Demands proposals which were going estimates for the Demands for show the figures of civil exnchments consequent on the ned, this does not mean that appear in those estimates, but he figures. Civil expenditure. e in the budget statement the dying the report of the Commine and vote on the Demands yet in a position to announce ns of the Committee will be te forecast of the allowance cannot come into full effect ul consideration to the report, ill be justified in taking the eduction of 4 crores can be , either in the ways proposed on of them. A further paper this lump sum reduction of ds, and when the time comes will be asked to vote not the s reduced in each case by nt Committee's recommenxcluding interest, the Com- al Budget estimate in 1922-23 ailed Budget statements for House will see that our cut of ch represents retrenchments of in the estimates, makes a ures, amounting to less than 2 essary to make for the fact that ot be in full operation during ernment of India will do their omplished facts and will leave eductions to the full extent of r cloth, and where necessity ys. But I cannot conceal from e full effect to the 4 crores are being taken in assuming 66 THE GAZETTE OF INDIA EXTRAORDINARY, MARCH 1, 1923. spring crop are so favourable that it is not unreasonable to expect a revival before long. The difficulty is to say how soon this revival will occur. Traffic receipts suffered a check in 1922-23, and on the whole I do not think it is safe to budget odr the assumption that there will be a very rapid revival in 1923-24. Our estimate for gross traffic receipts is accordingly put at 951 crores. It is 31 crores higher than the revised estimate for 1922-23. Two factors account in the main for this increase of 31 crores. The first is Oat in the earlier months of 1922-23 there was a considerable loss of revenue due to the strike on the East Indian Railway and the second is that the present increased rates did not come fully into effect on all Railways until about the 1st of July 1922. Working expenses and interest and other charges, without allowing for the share attributable to this head of the Ifthcape Committee's cuts, amount to nearly the same figure, leaving a net profit for the year of 35 lakhs which compares with the net loss on the current year's budget as now revised of R92,60,000. Posts and Telegraphs. Total revenue. 40. In the case of Posts and Telegraphs, we are able to estimate for a net receipt of 147 lakhs as compared with the net receipt of 24 lakhs in the 1922-23 budget as revised. This improvement is due in part to expected recovery in revenue and in part to reductions in working expenses made in anticipation of, or in consequence of, the recommendations of the Retrenchment Committee. 41. We thus arrive at the following budget position on the basis of existing taxation. As against an expenditure of 2,04.37 crores, we have an expected revenue of 1,98.52 crores, leaving a deficit of 5.85 crores. Before I proceed to explain to the House what we propose to do in regard to this deficit, I must turn for a moment to our ways and means position. V.-WAYS AND MEANS. 42. Public attention is usually concentrated on the annual budget of revenue and expenditure, but the Ways and Means budget is of equal importance, for after all it is the Ways and Means budget which shows the sums which the Government has to pay out under one head or another during the year and the sums which it has to get in from the public. Whether it is a provincial overdraft or an advance on capital account, or whether it is a revenue deficit, the money to meet the outgoing has to be got in before it can go out. The Ways and Means budget is, however, one which it is difficult to present in a clear and easily intelligible form. It is never possible to adhere to a strict programme in regard to Ways and Means operations. In financing the country's various liabilities and in finding cash for our own and the provinces' day to day disbursements, we have to be guided very largely by the Funding of Floating Debt, changing conditions of the money market both here and in:London. 43. During the current year we expect to meet liabilities, over and above' what has been met from revenue, amounting to 106 crores. These will have been financed mainly out of the proceeds of our rupee and sterling loans which have been on an unprecedentedly large scale. Our rupee loan realised nearly 47 crores and 2311 millions was borrowed in London during the year. One satisfactory feature of the year, to which I have already referred, is that out of these borrowings we have been able to reduce our floating debt by 40.6 crores, of which 32.4 crores consists of a net discharge of Treasury Bills held by the public and 8.2 crores of a cancellation of Treasury Bills held in the Currency Reserve. We cannot hope to continue the reduction of floating debt on the same scale over a long period, but I feel sure that the House will agree with me that it must be our constant policy to secure the early Remittances to London, 1922-23. extinction of the floating debt by its conversion into securities of longer term. 44. Our sterling borrowings have facilitated the provision in London of the sums required to meet our sterling obligations during the year. But advantage has been taken of the strengthening of exchange which occurred at the New Year to effect remittance by the method of selling Council Bills. Weekly sales have been taking place of moderate amounts since the beginning of January, and we have thereby been placing funds in London at a moment which, although somewhat in advance of actual requirements, is nevertheless convenient to the market. We anticipate that our balance in London will be about £8 millions on the 31st March 1923 as against a normal minimum balance of £4 millions, but the surplus will be required early in the new financial year. THE GAZETTE OF INDIA EXTRAORDINARY, MARCH 1, 1923. 68 intend to reduce, and eventually extinguish, these contributions. I am aware that this is not the solution which finds universal favour, though I think this is what the majority of the Provincial Governments desire. But so long as we have a defic, in the Central budget, it is obviously impossible for us to make a beginning with OF reduction of provincial contributions. Meanwhile, every Provincial Government, without exception, is finding very great difficulty in balancing its budget. The majority, I am afraid, did not succeed in doing so in 1922-23, though they are doing better I am glad to see for 1923-24. It has been suggested to me by more than one spokesman for the provinces that there is a feeling in the minds of the Provincial Governments and of their Legislatures that it would be unwise for them to show balanced budgets. They are, it is hinted, taking a leaf out of the book of some charitable and religious bodies which make a habit of showing an annual deficit in order to make a striking appeal to their supporters to come to their rescue. The Provincial Governments think, it is said, that they will get more sympathy from the Central Government and get rid of their provincial contributions quicker if they can show a handsome deficit and appeal to the charity of the Central Government. I should like to say for my part that the strongest appeal that the Provincial Governments can make to me in this matter of the Provincial contributions is to show themselves worthy of assistance from the Central Government by strenuous and successful endeavours to make both ends meet for themselves. Much, therefore, as we should have liked to be able to make.a beginning of the reduction of the provincial contributions, it is obvious that this year we must confine ourselves to an attempt to deal with our own deficit. I would, however, add this appeal to all who are interested in a reduction in the provincial contributions. Let them give us their full support in any measures we propose for securing a balanced Central budget in the certainty that by so doing they are hastening the day when the contributions can begin to be released. VII.-PROPOSALS FOR DEALING WITH THE DEFICIT. Interest on Gold Standard Reserve. 40. What then is to be done about the deficit of 5.85 crores ? First of all, we propose to make an adjustment which, though little more than a change in methods of book-keeping, has the effect of reducing the apparent figure of the deficit by 1.59 crores. It is proposed to ask the House to continue during 1923-24 the arrangement made a year ago for crediting to revenue the interest on the securities in the Paper Currency Reserve. There is a similar source of income in the interest on the £40,000,000 in the Gold Standard Reserve, which is expected to amount to 1.59 crores in 1923-24. This is, in essence, of the same nature as the interest on the Deficit cannot be left ntfovered. Paper Currency Reserve's investments, and we propose for 1923-24 to treat it in the same way. This change does not really add anything to our available resources or alter our Ways and Means position, but I think it is justified on merits. 50. We are thus left with a deficit of 4.26 crores, and the only way left for meeting it is by additional taxation. If the House will turn its mind back for a moment to what I said about the accrued deficits of the last five years, it will recognise that it cannot leave the deficit of 44 crores untouched. It will perhaps he asked whether the fact that several crores in the military expenditure and a considerable additional amount in the non-military expenditure represents non-recurrent expenditure due to " lag" and " terminal charges " would not justify the deficit being allowed to continue for one more year. This argument unfortunately does not represent the full facts. If some crores in the military budget represent non-recurrent expenditure, on the other hand over 2 crores of the cuts made in the military budget represent non-recurrent savings, being arrived at simply by a reduction in stores. Similar considerations apply to some of the other cuts both in the military and the nonmilitary budgets, in particular in the railway budget. Moreover, some terminal charges will still have to be met in 1924-25. Whatever our hopes may be, we have no reasonable certainty that the budget for 1924-25 would balance on the basis of present taxation. Moreover we have not yet begun to provide anything towards making good past deficits. If 1924-25 were to turn out much better than it is possible to promise at this moment, we can, if we have got through 1923-24 without a deficit, turn our thoughts to reduction of the provincial contributions. THE GAZETTE OF INDIA EXTRAORDINARY, MARCH 1, 1923. 69 51. Our conclusion, therefore, is that we must ask for some increase in taxation. New taxation No one likes new taxation. It is a disappointment to the House, and it was a great necemarY. appointment to me, that new taxation is needed at all. If he is wise, a Finance Igember dislikes new expenditure and dislikes new taxation even more. But most of all, he loathes and abhors a deficit. I hope the House will agree that I have demon: strated to the full the absolute impossibility of its leaving a sixth year's deficit of 41 crores to be added to the appalling aggregate of 100 crores of the deficits of the last five years. The House would be false to its trust if it allowed the Government to adopt so pusillanimous and mischievous a course. The credit of India is in jeopardy. It is already under the cloud of the deficits of the last five years. But India's financial record has been so good for decades preceding those five years that hitherto the damage is not irreparable. The world has trust in I udia's record and has felt sure that the era of deficits could only be a passing phase. It is our duty to-day to justify that trust. We have made drastic cuts in our expenditure, but we have not achieved a balance. New taxation is, therefore, inevitable. 52. What form then is the new taxation to take ? We have carefully reviewed the Increase in salt existing taxes. In particular, we have examined those taxes which were proposed ants. last year and not accepted. One after another m e have had to reject promising expedients, and finally we have come to the conclusion that the right course is to ask the House to agree to an increase in the salt tax to E2-8 a maund. In a full year, this increase is estimated to yield 6 crores, but we cannot count on its bringing in more than 4i crores in 1923-24. The House will see that this additional revenue is just sufficient to cover the deficit of 41 crores, to give us a balanced budget, and to leave us a small surplus of 24 lakhs. In view of the uncertainties of our estimates of expenditure, this House will agree that this is not an undue margin to leave over for contingencies. CO N CLUSION. 53. My allotted task is finished. I have laid before the House the Government of India's account of their stewardship for the year that is passing and their proposals for the year 1923-24. I am painfully conscious of the responsibility which attaches to the Member introducing the budget. He cannot hope that his proposals will receive universal approbation. I have no doubt that when the details of our proposed expenditure come up for discussion, some Members will criticise this or that retrenchment as iniquitous and the retention of this or that item of Some other Members will disagree entirely with them on one or other or both of these criticisms. But all will manage to disagree with me on some point or other. I hope none the less that the Government of India will receive the credit which I claim is their due for courageously shouldering their burden and boldly coming forward with a budget which, at one and the same expenditure as outrageous. time, effects drastic reductions in expenditure and calls for a further sacrifice in the form of new taxation. 1 appeal to the House for one last long and strong pull, all of us pulling together, in the confident assurance that so doing we shall quickly get the boat out of the vicious current which is threatening to drag India down on to the rocks of insolvency. Once back in safe waters, I have every hope that in a surprisingly short time we shall find ourselves on the flood tide of prosperity, and shall be able to turn our minds to pleasant thoughts of reduced provincial contributions, reduced taxation, and increased devotion of our resources to the development of India. I was struck a little more than a week ago by a remark that fell from Sir Deva Prasad Sarvadhikari- when, speaking on the Racial Distinctions Bill, he said that the House had had three red letter days in succession. Let us crown our successes by a fourth red letter day, and end our session with a balanced budget. BASIL P. BLACKETT. The 1st March 1923. ouk f;ce- 44,4A-t, I z'ivt AA_ 7Le 1' t-v5Zca-vt, G-A-dc hi, ts.e. tvvt, zrwrir tr /2 -, erf/ A-W m'At4_, (9-ez, ( )74_ 4;--e. PE- eft -e r st1,4-{,t /11,-%44,, or c- 1114-Le4, 1"4"%-it e eirk,rimy y14(4) r. el't (XL Tee- 4411-e A e-t- < heicie A'AV./.1e ( Gu 4-14e/ ;44 6E, eet,t 1.-1,...11-7-,zre., //9/4, 7 '17/ chke,/ 1,-"tvt cr e(Ole V7 I AA,f;u4 91 Pud eefizAitk et, ee4,4i (/? dee-tv /1-s-t.LA,62-1 h le,t_ 4 t tifet Gv ale./ 0-e-ei , 1kt e vt- to 414:114 ia At.:41 712,7--;7e,47-"N kc. eiteA, As4 4J PApt tl.t' fit. -ur '714 /62 (71 1-t" . zec-Atyi. XI) aioul /VA t hfrtt 371 IC-C/ 'Ai IL7fiAPC Ail_ 4d(7z. a "47 (laiir S (ze_aZ -4it:/ t..ere /114, 7 A-31-vz tec. 4., 111VVIe *et47' f: 7,W Zs- /11-7.c4-Ave n 1,141;7. (4, a4e, ifrt 11,0:14-v 1-4t- c, /14A) 47,111°Vt-CA. h4?7,61 ;e-e.//11) *14;K, r fiL4 h/74c, Kilo-01/C f4e,e,") Z; A44-/- 2i/r(Atie) kifteXA-e) ;eec-044 )4`cP2A0-,, /70A-,4 ALA ilst.) fo, 4%-,W 14-1ik? /Irt ale4.42,2 rt sti j./1;<4 71-4 1 /"(177-74%. 4--G a Q-)u-r t/ °Ai-77A1 A/772 4 e// ,r2z 9N4:1),e, e,t7A4aP "-Z4c..,7 /0/- Ik COPY os, FINANCILL MEMBER OF COUNCIL March 29, 1924 My dear Strong 111 I have owed you a letter for nearly as long as you owed me one till you last So I seize the moment when our numerous retinue has carted all our baggage off to the station en route from Delhi to Simla, either direct as most of it will go, as to accompany us on a three weeks trip to Kashmir + back to Simla. We are off tonight +are in gay mood as this is our first real holiday in India. We have done quite a reasonable amount of travelling + sight seeing but always in more or less official business. So we are in great spirits. -.,;e had planned a trip in 1.he Simla lakes last October but I .ent to bed aith diptheria wrote. instead. My second budget is over + launched. The political seas which buffeted it were violent + unreasoning, but it has escaped most of the damage thanks to the renewed Only it has had to be shorn of its most constructive powers of the Government. feature, the proposal to begin to relieve the Provincial Govts. from the burden of giving subventions to the Central Government. The problem of making India into a real Federal State is one of the most important financial problems here unsolved. The poliBut it is one which must I fear wait for long on political developments. tical stupidity of our Indian revolutionariesters, if I may coin the word, is incredible. me with quite a little special They really rather liked the Budget + have confidence as being a broad-minded well-.4isher of India + no bureaucrat. But they rejected my budget without its even occurring to them that this was unkind to their , but the absurd notion that something friend. Their stupidity however was not was to be gained by formally rejecting the Finance Bill + at the same moment definitely requesting the Government to see that no harm came of it. It has been an interesting year for me. My two main tasks are, I think, first to give India the makings of a modern financial system based on broad principles + not merely a hand-to-mouth affair year by year, + second to try + educate both the bureaucracy + the legislators in the meaning + methods of Parliamentary control of finance + expenditure. The bureaucrats find it very difficult to believe that they can seriously be asked to explain their actions to a set of incompetent legislators, + the latter are continually wanting to control the minutest details of the executive's actions + cannot see that the task of an executive is to execute. Moreover they are mostly third-rate lawyers with no grasp of principles + finding how soon they get lost in big questions they love to worry over tiny questions of rupees 100 here + there. I .onder if you saw a speech I made in Bombay in December about Indian Exchange + It was quite a big effort for this backwater + has had good educative results. Currency. Our currency position is now thoroughly sound but we are waiting anxiously for other parts of the world to settle down to a gold standard + are forced meanwhile to wait on events. I am disappointed at the slow return of sterling to parity + don't altogether acquit you of blame, but I can understand your fears. But is the Federal Reserve system making any profits for its shareholders? The currency problem here which puzzles me most is however the problem of excessively dear money in the winter. Currency goes up country to pay for the crops, + hich depends it comes back only slowly + partially. It needs a "good m_.rriage season" Otherwise only a on astrological observations to bring currency back in a good year. I tried expanding the bad monsoon helps, + that is very objectionable in other ways. currency against internal bills of exchange this winter besides the ordinary method of expansion against sterling securities, but in spite of a special addition of 24 crores we have had very dear money ever since December + our problem now is to reduce the We are far too little currency again to normal. in what ought to be the slack season. ACKNOWLEOGEO JUL I ti) 1924 Fl Delhi, the 12th larch 192 4. dear Strong, This letter will introduce my friend Mr. H. Denning, Controller of the Currency in India, who is passing through the United States on his honeymoon trip. Any kindness that you may be in a position to show him will be greatly appreciated by Yours sincerely, Benjamin Strong, Esquire, Federal Reserve Bank of new York, New York. vz.7..<.T\loWl.,EDOED AUG 2 0 1924 N)Wt.,E06e0 SEP 1 1 1924 cL a r). LL: C.) j its :NJ do CD L1J s. Delhi. the 3rd Decbtilber CD 11025. ,\N c' Ey dear Strong, I am sorry that the question of material for the Princeton Library on Indian Finance has got hung up. I have spoken to Professor Coyajee, the man who undertook to assist us in the matter, and he is, I understand, writing to you. I have arranged with him to get a catalogue made of the books in the Calcutta library as a start ,and guaranteed payment of the expense up to Rs.120. I hope that direct correspondence between you and him will now proceed vigorously and result in a settlement to your satisfaction. I am having a great time here with the Royal Com- mission on Indian Currency under Hilton Young as Chairman. I doubt if I ever enjoyed myself quite so much as during the two-andTa-half days on end when I was giving evidence. The line I have taken has staggered some people, and as it ultimately depends on co-operation from : :ontagu :roman and yourself, unless the Commission turn me down as is posible, I may as well tell you what I am up to. The views I have arrived at have not been reached without a struggle, but they represent my honest convictions. W1' before the War with a Stering Exchange standard, though she was always encouraged to believe that it was a steppin stone only to a Gold Standard with a Gold Currency in circulation. She could get on quite well with an improved system on similar lines, the main addition to the pre-war arrangements being the transfer of the control of the Paper Currency from the Goverment to the Imperial Bank of India, and the undertaking of a statutory obligation to give sterling for rupees and rupees for sterling at the gold points, instead of leavinr this vital matter at the discretion of the authorities as it was before tie War. This would be a Sterling Exchange standard. You could ,Aake it into a Gold Exchange standard, though rather cumbrously, by substituting an obligation to give foreign exchange for rupees and rupees for foreign ex- change at th gold points for the obligation to give and take sterling. Both the Sterling 7Exchange standard and the Gold Exchange standard involve rather cumbrous arrangements so long as the silver rupee is unlimited legal tender and the note is convertible into the silver rupee. Both systems, aowever, would work reasonably well subject to two conditions, which are (1) that sterling and gold may be regarded as equivalent in all but the most abnormal circumstances, and (2) twat the silver bullion in the rupee will not, except in the most abnormal circumstances, become more valuable as bullion than as coin. With the rupee at ls.6d, this means that the price After a very careful examination we have come to S the conclusion that the cost to the Budget will not be serious. At a maximum it will cost us ,compared with present arrangements, something like Rs.165 lakhs a year for the first 5 years and about iZs.1 crore a year there- These are maximum figures and would I believe after. be found to be unnecessarily high estimates. It remains to consider the effect on the world's gold and silver markets. We calculate t:.lat the immediate effect of the introduction of the new system would be to make all those who are hoarding silver rupees in India turn out their silver rupees and demand gold in their place. The maximum demand for gold which we can foresee is £ 100 million sterling, again a very high estimate, possibly twice as much as would really be required. This demand would come quickly in the course of a very few years, but once it was stisfied, the Indian Currency system would cese to be in danger from the hoarding of. over-valued rupees, and I have no dou'zt that the annual demand of India for gold thereafter would be progressively reduced. One might put it that over the next 30 years, in spite of the excess initial demand, India would not take more gold under the new system than under the old, and thereafter she would take very much less. One would hope that in 50 years India would be very much nearer western conditions in the matter of banking and invest- ment; she would be a far better customer for the world with her standard of living iz.proved as it would be, 41 and might even at a fairly early date become a lener of capital abroad instead of a borrower an;f hoarder. The crux of the matter is the effect on the gold market of a sudden demand for gold amounting to a maximum of £ 100 million sterling, and the effect on the silver market of an addition to the surplus silver of the world amounting to a maximum of about 600 million ounces, bet- ween two and three times the world's annual production of silver. So far as gold is concerned, I have not the least hesitation in sayinOldly that you and /Torman between you could let us have £ 100 millions of gold out of t.le available reserves without making the slightest im- pression on the world's gold prices or °I, the maintenance of the Gold Standard in I]urope and America. But you and orman would I am sure, while saying that you agree with this, go on to say that you will have enormous difficulty in persuading the man in the street W.hether in London, Hew York or Washington to believe you. However, I do not despair. But the threat of letting loose 600 million ounces of silver on the world undoubtedly adds to the problem. I cannot think that it would make India popular with the silver producers of the United States or that these latter gentlemen would encourage the Federal Reserve authorities to facilitate India's operations of substituting gold for silver. Ly idea is that we might minimise the the trouble by putting a special import duty on silver imported into India, the effect of which would be to cut India off from among the countries seeking to :atisfy their silver requirements out of the World's silver supply, and confine the Indian market for a period of 10 years or so to purchases of silver from the Government of India. There are our proble(as for you. You will recognise that they are not without a world interest. It may seem rather a bold demand on the part of India that you should assist her in satisfying her wishes, but I firmly believe that if a long view is take ;, the world has an immense amount to gain by assisting the process. India as a real partner in the gold standard countries of the world will be far more valuable than as a continual sink of gold which she will certainly remain as long as you refuse her gold in circulation. India as a country with a big investment market and widespread banking facilities will mean an enormous addition to the world's wealth and to her value as a market for the products of the world, particularly of the manufcturing countries of the world. I do not say that the Commission will unanimously recommend the adoption of my proposals,but I feel fairly sure that an important minority at the minimum will favour them. I ought to say of course that we should desire to make the process of change as gradual and easy a one as possible in order to facilitate the transition both for India and for the world, though the difficulty is that an announcemen of policy may unavoidably lead to an immediate demand for gold in place of silver rupees in hoards. be interested to hear what you think of me. With best wishes for the New Year, Yours very sincerely, Benjamin Strong, Esq., Federal Reserve Bank of New York, New York, U.S.A. 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My dear Strong: This paper was intended to be used before N the century was in its teens, but it has lived to be good things for 1928 and for providing a very belated ciated letter of June 27. It was just because I appr has remained so long - too long - unanswered. I wan buoyant enough to send a full letter in reply, and i interval between a busy and hurried past which lies b lies ahead that I can sit down to it. I expect that seven weeks out of India, of which twenty days were voyage, are largely responsible for my feeling energe must forgive me for setting you the task of reading t type, but I have not the habit of putting intimate or a letter which I dictate. There's really an amazingly large amount of of the history of Inctian finance in the last year. J to a titanic if Gilbertian struggle to get the ratio of the statute book, much assisted by the production by out of a hat, of a startlingly popular budget, whose really reflected the fruition of much hard labour and of which I am, I hope justifiably, proud. But one's veniently exactly the right moment to display themsel public gaze as did mine with my budget for 1927/28. The next few months were teasers. Apart f misadventures of the Reserve bank bill, I found mysel tough problem in maintaining in real life the stabili - 2 - islation could give stability, on the floor of the assembly. The rupee refused to be worth Is. 6d., and you a.s.k me for some explanation of the difficulties. The first was the dead set against the rupee of the politico-:peculator group in Bombay, who fought hard to make the big profits which they hao counted on obtaining by fixing the rupee at ls. 4d. by legislation. They went to unexpected But, of course, lengths and showed more backbone than I credited them with having. The they could not have done much if the facts had not been partly on their side. clear recognition of this in my own mind aid not lessen my anxieties at the moment of the crucial debates in the legislature. To explain the position in April to June, at least to March, 1926. isr, it is necessary to go back For a year and a half previous to March, 192.6, prices and currency conditions were accommodating themselves comfortably to the ls 6d_ ratio, and little if any occasion had arisen for intervention by the Government to prevent a fall in the rate. By the Government I mean all the authorities concerned, i. e., the Imperial Bank, the Government of India and the India. Office. In March, 1926, a poor wheat harvest and various other circumstances brought about a change. It became important to take currency off the market and, of source, we had good reason to do so as we had increased the issue against Tterling to the tune of nearly crores in the previous three years. ports that we had to deal with. F.0 but it was not only a slackening off in ex- The velocity of circulation had been (and still is) increasing very rapidly in India owing to various factors of which the most inportant are the rapid increase in the habit of banking and investment which was rendering silver rupees redundant as they came out of hoards. I Go not atop to define hoards, - and the replacement of rilver rupees in hoards by gold ano silver billion, and tho fall in world prices was also operating to make rupees redundant. It is extremely difficult to assign the exact degree of its importance to auch factor, but the increase in the banking and investment habit is a very real 1-hen- 3 ongon. It has a close connection with the next stage of our difficulties. The surplus cash was finding its way steadily into Government securities for want of confidence in any others, anc the rise in Government securities was accentuated .coming beyond all reason by the Bombay speculator, who saw the rise/ant was either him- self takenlin or was taking in others for his own purposes by the confident, assertion that Sir Basil Blackett means to push 3 1/2%e up to par. (They were below 60 when I came out and were over 70 by March, 1926, and the confidence in my fi- nancial capacity was then ana is still more now pathetic.) :That was to be done in these circumstances? The currency Commission was sitting and it was supposed to be an open oueetion at what rate the rupee was to be stabili-ect. If, therefore, we stepped in to take the action necessary to main- tain stability at 1/6 we should be open to the charge of manipulating not only the currency but also the Commission' s report. Yet it was clear enough that stability could very easily be maintained by simple enough action if taken in good time and steadily followea through. dtlhat actually happened was that after finding divided councils in the Inaia Office (ana much ignorance - our friend Goodenough in the chair of the Finance Gommitteel), ano unwillingness to proffer advice or help in the Imperial Bank, I took the bit between my teeth, and took as much action as I could without being dismissed for insubordination. I had the loyal, but entirely uninstructed, support of the Government of India in all I did, but had to fight the Inaia Office at every turn, not because they had a different policy but because they had none. I contracted currency fairly heavily against sterling, but was held up from June to October by the India Office when I tried to contract currency against the cancelation of Government of India securities in the reserve. The reason given me for this a few !leeks ago - I had never been given a reason up to then, and only got this in conversation in London - was that the India Office were anxious lest my available rupee reserves should run short if I used them up in can- 4 - *ling Treasury bills in the reserve. This is illuminating, for at almost the same moment I was crying to get agreement out of the India Office to an issue of rupee loan for a larger amount than I needed for my immediate capital programme in order to stem the rise in Government securities which was getting out of trol. con- (7, 1/2s up to 78) and to take money off the market, and the India Office were objecting on the ground that it was wrong to build up too large bal:nces. I had to acquiesce because I needed India Office support in carrying out and India Office in getting sanction for the acceptance of the Currency Commission's The upshot was that I never did suite report which was just about to be published. enough to keep rupee stable and never did it quite soon enough. The only valid reason for this failure was the political necessity of not antagonizing opinion against the Currency Commission's report. However, I did just enough to maintain the rupee within the gold points. Meanwhile the deport was issued, but for political reasons we had to postpone legislation fixing the rupee at 1/6 from August 1926 to March, 1927. !4e did, however, &t out a square-footed ainouncement that we should meanwhile take all steps necessary to maintain exchange. Armed with this I defied the India Office in October, 1926, and contracted against rupee securities of the Government of India and was not far from being recalled for insubordination. December, 1926, I contracted again in the same form In with the blessing of the India Office, and it, is only the power to do this freely which eventually saved us. by December, 1926, the political and financial campaigns to reduce the (not a very good rupee is ls. 4d. was in full :wing, but it was the busy season one however and a late one) and we were all right by now till April the bill to fix 1/6 was through. and by - 5 - - 6 - 'India Treasury Bills held in the reserve, but also against Government of India 3 1/2 per cent stock held in the reserve and then instead of canceling it sold it (at a very high price) in the market. It was This did the trick. an ordinary "Central Bank" operation but was unheard of in India. 3 1/2 per cent loan came down to 76 1/2 (and has since gone to below 75), the flow of capital to London became less pronounced, we issued a short-term loan in India at a moderate price and got more than I expected, and the contraction of currency at last caught up the surplus of silver rupees. Since then all has been compara- tively simple and a small sale of silver has both increased our resources and given the speculators a lesson. But we had to borrow 135,000,000 in London in six-months bills, which we almost avoided and should have avoided if weld reached ec;uilibrium three months earlier, and we're thinking of converting these bills now into a long-term sterling loan, an operation which is however not absolutely necessary at the moment but will improve our sterling resources for purposes of the inauguration of the Reserve Bank and for certain capital expenditure purposes which we foresee, and we've been rather up against it in India for ways and means during the lean :quarter of the financial year just ending. But we're through and it is not impossible that import gold point may be reached in a month or so, which I don't much want but may be unable to prevent, and any doubt as to my capacity to maintain 1/6 is at an end, though I am told that some optimists in Bombay still hope to bring exchange down to 1/4 when I'm out of the way. I've been much interested of course meanwhile in your doings. The failure of the Bank of England rate to go to 4 per cent after dropping to 4 1/2 per cent in the spring was a bitter disappointment., for which I don't love the French. It would have raised gilt-edged securities in London just enough to make stocks in India unimportant. the gap between them and our rupee prices of Government - 7 - ally July. you helped us materially by lowering the Federal Reserve Bank's rates in July was a good month for me, as it relieved me of some of my fears such as a 5 per cent rate in London and brought me a good monsoon without which we should have been once again in trouble. I've written at enormous length and hope you're not bored. It is really a great pleasure to me to set out the story at length to a comprehendin7, listener, and as a matter of fact I've never done so before, and the story has taken much more concrete shape in my own mind as I've written it. read too egotistically. I hope too that it doesn't I've some useful - very good - subordinates, but with the exception of 0. A. Smith (whose health placed him hors de combat for the whole period March to July 1927) I've no one at all to advise me, and no one at all to share the responsibility with except the Government of India, none of whom understand the first. thing about it all and all in the soup with me if I take them there. of whom rely implicitly on me and are So it really has been a one-man job for me, and as I have said made more difficult by the necessity of carrying old fogies at the India Office with me and of compromising at every turn with them and with our tangled and incredible politics. (Of course I'm deep in the said politics most of tine time and since July have had the job of Leader of the Assembly as an extra for my spare moments.) On the hole I'm rather proud of having tale of too late at every step. ,110n through, even if it is a If we had been able to do the right thing in March to July 1926, we'd have been up to date all through and our troubles would have been much lees. On the other hand I'm bound to say thank you for a very fair monsoon in 1926 and a really good one in 1927. I've gone to such lengths over thin story that I've not cheek enough to write and you wouldn't have patience enough to listen to the full story of the Reserve Bank Bill. political Besides it isn't through yet, and it is so much more -8 -- to financial that it hasn't the came real interest for you as the story of the ratio. I'll try anc tell a brief story however. pill rather reluctantly, but with good grace. The Incia Office swallowed the ie drafted the bill in a month, great feat for which Denning and the Draup;,htsman deserve great credit. a The ratio controversy fortunately kept the Reserve Bank out of politics for some months, and it on considerable favor (1) as offering an alluring if indefinite prospect of fat jobs for Indians and their sons and nephews and (2) from my description of it as a ri step towards Financial Swaraj. But there were always big lurking dangers. The ratio fight made Purshotamdas and others so mad that they were ready to no anything to spite me, and vested interests, exchange banks and Indian joint stock banks, dislike° the idea of a Reserve bank. I kept Purshotamdas in check by winning over the Swarajists to my side in support of the principle of the bill, and they were also very useful allies, first against Purshotamdas an° then against the exchange banks and finally even against the Indian banks, representing as the fz:arajists on the whole do the agricultural and up-country inteligentsia against the Bombay capitalist. I cut much ice too by leaving the delights of Simla and going °own to Bombay and Ualcutta in the height of the hot weather to hold meet- ings of the Joint Committee of the Legislature. This was not a calculated gain as I really delight in getting out of Simla whenever I can. But at the very first meeting at Bombay a combination of Swarajists and the Bombay capitalists gave me one in the eyes by voting for a State Bank and not a shareholders' bank. They really meant a tank run by and for the benefit of leg- islature, but when they realized that they had liked the Reserve Bank right off, the Swarajists came right round and said they quite agreed that the bank ehouln be free from Government control and free from political influence, but itmust not be in the hands of capitali ate, European or Indian. And they asked very pertinently they should pay the shareholders 8 per cent for money which the Goverment could - 10 - ieead of one. The principled for which I fought were (1) that the bank must be absolutely free from Governmental control (2) that there must be no control by the legielature, and no political influence on the Board and no members of the Legislature on the Board and (3) that the directors must be responsible experienced men. subject to this I was to do without shareholders. And I'd just got an almost unanimous assembly behind me for a very workable scheme substituting"etockholders" for "shareholders," and the non-cooperators were cooperating and Purshotamcas was bide-stepping hard, when bang! The India Office said they wouldn't have a hank without shareholders. alarm This Was the reflection of the and intrigue) in Calcutta of a week earlier which I had by that time largely allayed, and of the real alarm in London. But whatever the merits it was a shame- ful betrayal of the Viceroy :>_nd my.,elf by the India office. They'd let me negoti- ate for a fortnight with the assembly and knew of all my moves day by day, and then at the end went back on me. There was an outburst of political vituperation in India, bui, for the moment I was an Indian hero, and the curious result of it all was that once it was realized that the bill was nearly dead and that there would be no reserve tank after all, I was implored to save the situation at all costs and they 4puld accept almost any reserve bank I could give them. "7 o r si weeks I wfla resigning and shoild certainly have gone if my going had not meant (1) a nasty mess for the Viceroy who constitutionally was the one to resign first (?) no Reserve bank for India (3) a first class political row which would have damaged the critish position in India, arai though it might have gone far to finish the India Office would have been begun in rather unpropitioue circumstances and done little good to any one. Eventually I forced everyone to agree to my going home for twenty days and I've c_me back with a scheme which is practically the stockholders' scheme only on a shareholders' basis, and I've ciscovered, I hope, a way of making the shareholders take a. real risk or at least a live interest in the ler willing to cont ess that you and he - 12 and all the rest of you (and us) keep needless- lywOrke gold reserves and could do with far less if you would only face honestly the question - what are gold reserves for and what is the true criterion of their adequacy? - even then you and he would be much too frightened of the unenlightened multitude to risk saying so in public. I suppose the fact is that a good deal of gold is needed so long as the public's confidence in the currency is dependent on the mistaken notion that it is "as good as gold" only if there's a lare heap of gold to look at. But even so you and Norman have more gold than you need, and could do far more than you do to educate your public to do with less, must begin by giving my Inaians gold before they can not needed. And you are not in to India by rejecting my plan. begin .iherea,s I to realize that it is the end (or even for many years) sending less gold On the contrary you increase the strain in the end. However, I've got as much as I expected out of Hilton Young's Commission, and don't complain. The situation in England, as I saw it in my 20 days, does not 4ive me much satisfaction. There is some gradual improvement going on all the time in the tranquilization of Europe, the rationalization of industry, social servi ces, the reations of capital and labor, and so on. But it wouldn't take much to up- set Europe again, and in England the Go"ernment and everyone else is spending recklessly when they ought to be saving. They'll never et the burden of the interest on the internal debt reduced, and will lose markets in the Empire and outside if they don't add very appreciably to their annual savings. They've got to lend to Europe if U. rope is to recover and they've got to lend to the Empire if it's to remain the British Empire (unless, of course, the U. S. A. takes the whole show over as the American Empire, which is nonsense), and they can't Co it unless they save money and create a much larger capital fund. So one day England and Europe will repuciate their debts of all kinds to the U. S. A., not intentionally so far as England is concerned, but for lack of money to pay. - 13 - But I hope they'll get, tired of spending and then all will be well. _AD Spending is the wrong wore. There's a host of things they ought to be snending money on, but they're chucking it all 'Away in search of distraction ana to avoid boredom. And "the world is not clever enough to manage the machine it's createa." I heard with great regret of the illness which incapacitated you and do hope you are fitter. You'll be none the healthier for reading this, I fear, if you try to wade through it in manuscript, and it'll be 1929 before you get to the end. Best wishes. Yours ever, (signed) P. S. I never meant to inflict this all on you. should first of all have it typed. losing a mail. Basil P. Hackett. I suggest that you I would ao it myself if it dian't mean etnd if you do have it typed, I'd be grateful if you would have two copies made and send me one, as it would be useful to have one for my own use, though I wrote it all with no such idea in my mind. (Signed) B. P. B. AnAYfree_ cpc: "yett,fedi, Ac. c. AAL:e k. c. S i. THE GOLD STANDARD AND RESERVE BANK OF INDIA BILL, 1928. CONTENTS. CHAPTER 1. PRELIMINARY. Siccrioxs. 1. 2. Short title, extent, commencement and duration. Definitions. CHAPTER II. INCORPORATION, SHARE CAPI1A1, MANAGEMENT AND BUSINESS. Establishment and incorporation. of the Reserve Bank of India. 3. Establishment and incorporation of Reserve Bank. Share Capital. 4. Share capital, share registers and share- 5. Increase, reduction and transfer of s hare holders. capital. Offices and Branches. 6. Head Office, branches and agencies. Management of the Bank. Management. Qualifications and disqualifications for Directorships. 9. Composition of the Board, and term of office of Directors.. 10. Election of Directors representing shares 7. 8. 11. 12. 18. 14. 15. 16. holders. Removal of Dirt etors. Casual vacancies. Power to make election mit s. Meetings of the Board. General meetings. Temporary provisions. BusinesN of the Bank. 17. 18. 19. Business which the Bank may transact. Power of direct discount. may not Business which the Bank transact. CENTRAL BANKING FUNCTIONS. Relations of the Bank with the Secretary of State in Council, the Governor General in Council and Local Governments. SICTIONe. 20. Obligation of Bank to transact Govern- 21. Bank to have the right ment business. to transact Government business. Note Issue. Right to issue bank notes. 23. Issue Department. 24. Denominations of notes. 25. Form of b ink notes. 26. Legal tender character of notes. 27. Re-issue of notes. 28. Recovery of notes lost, stolen, mutilated - or imperfect. 22. Prohibition of issue of private bills or notes payable to bearer on demand. 29. 30. Issue of demand bills and notes. Penalty. 31. Assets of the issue Department. The Reserve. Liabilities of the Issue Department. 32. Liabilities. Initial- assets and liabilities. 33. Transfer of assets Ind liabilities to the Bank. &pay of coin, and of different forms of legal tender currency, 34. Delivery to Government df surplus rupee coin. 35. Purchase of rupee coin. 36. Obligations of Government and Bank in 37. Obligation to supply different forms of respect of rupee coin. currency. Obligation to sell gold and gold exchange. 38. 39. Sale of gold. Sale of gold exchange. Obligation to buy gold. 40. Obligation of Bank to buy gold. Suspension of Reserve requirements (ind tax on note issue. 41. Suspension of Reserve requirements. 42. Bank exempt from further note tax. 43. Duration of the privilege of note inns. Powers of Government in respect of note A the registered shareholders of the Bank ; (g) " gold standard country " means any country, other than British India, from which any person is at liberty to export gold and in which any person may obtain gold on demand from the principal currency authority on payment of the equivalent thereof, as prescribed by law, in legal tender currency ; (h) "Issue Department " means that department of the Bank which is charged by section 23 with the conduct and management of the note issue; (1) " provincial co-operative bank " means any society which is registered or deemed to be registered under the Co-operative Societies Act, 191.2, or any other II of 1912. law for the time being in force in British India relating to co-operative and the sole business and object of which is the financing of societies the other societies in a province which are or are deemed to be so registered ; (j) " the Reserve " means the assets of the Issue Department as specified in section 31 ; (k) " the Reserve Fund " means the Reserve Fund referred to in section 46 ; (1) " rupee coin " means silver rupees which are legal tender under the provisions of. the Indian Coinage Act, 1906 ; and III of 1906. (9n) " scheduled hank " means .a bank included iu the First Schedule. CHAPTER II. INCORPORATION, SHARE CAPITAL, MANAGEMENT AND BUSINESS. Establishment and incorporation of the Reserve Bank of 3. (1) A Bank to be called the Reserve Bank of India shall be constituted for and Establishment incorporation of Reserve Bank. the purpose of taking over the management of the currency from the Governor General in Council and of carrying on the business of banking in accordance with the provisions of this Act. (2) The Bank shall be a body corporate by the name of the Reserve Bank of India, having perpetual succession and a common seal, and shall by the said name sue and be sued. Share Capital. 4. (1) The original share capital of the Bank shall be five crores of rupees Share capital, share registers holders. and share. divided into shares of one hundred rupees each, which shall be fully paid up. (2) No amount in excess of twenty thousand rupees shall be issued to any one person or to any two or more persons jointly, and no person shall be allowed to acquire an interest in the share capital of the Bank, whether held in.his own right, or held jointly with others, or held partly in his 3 own right and partly jointly with others, to a nominal value in excess of twenty thousand rupees. (3) Separate registers of t-haieholders shall be maintained at Bombay, Calcutta, Madras, Rangoon and Delhi, and a separate issu3 of shares shall be made in each of the areas served by those registers, as hereinafter defined, and shares shall not be transferable from one register to another save in accordance with conditions to be prescribed by the Governor General in Council. (4) A shareholder shall be qualified t o be registered as such in any area in which be is ordinarily resident or has his principal place of business in India, but no person shall be registered as a shareholder in more than one register or as a holder of an interest in the share capital of a total nominal value exceeding twenty thousand rupees ; and no person who is not (a) domiciled in India, or (b) a British .ubject ordinarily- resident in India, or (c) a company registered under the Indian Companies Act, 1913, or a society VII of 1913. under the Co-operative Societies Act, 1912, or a scheduled II of 1912. registered bank, or a corporation or company incorporated by or under an Act of Parliament or any law for the time being in force in any of His Majesty's dominions and having a branch in British India, shall be registered as a shareholder or be entitled . to payment of any dividend on any share. (5) The Board may, at its discretion, without giving any reason, decline to allot shares to any applicant or to register any transfer of shares. (6) The areas served by the various registers mentioned in snb-section (3) shall be as follows, tin inely : - (a) by the Bombay register-the Presidency of Bombay (including Sind), and the Central Provinces ; (b) by the Calcutta register-the Presidency of Bengal and the provinces of Bihar - and Orissa and Assam; (c) by the Madras register-the Presidency of Madras and the province of Coorg ; (d) by the Rangoon register-the province of Burma, and the Andaman and Nicobar Islands; (e) by the Delhi register-tbe remainder of India, including the territories of Indian Princes and Rulers in India. (7) The nominal value of the shares originally assigned to the vatious registers shall be as follows, namely :(a) t., the Bombay register-one hundred and fifty lakhs of rupees ; (6 to the Calcutta register-one hundred and fifty lakhs of rupees ; (c) to the Madras register-forty lakhs of rupees (d) to the Rangoon egister-forty lakhs of rupees (e) to the Delhi register-one hundred and twenty lakhs of rupees : Provided that, in the event of the shares assigned to any register not being fully taken up at the first allotment, the Board may, with the previous sanction of the Governor General in Council, transfer a portion of such shares from that register to anaher. 4 (8) In allotting the shares assigned to a register, the Board shall, in the first instance, allot one share to each applicant qualified under subsection (4) to be registered as a shareholder on that register; and, if the number of such applicants is greater than the total number of shares assigned to the register, shall determine by lot the applicants to whom the shares shall be allotted. If the number of applicants, is less than the number of shares assigned to the register, the Board shall allot the remaining shares to applicants who have applied for more shares than one ; and if the number of extra shares so applied for exceeds the number of shares so to be allotted, the Board shall allot them among the various applicants in such manner as it may deem fair and equitable : Provided that such allotments shall in all cases be subject to the restrictions contained in subsection (2). If, after all applications have been met in accordance with the provisions of this sub-section, any shares remain unallotted, they shall, notwith- standing anything contained in this section, be allotted to Government, and shall be sold by the Governor General in Council, at not leas than par, as soon as may be. 5. (1) The share capital of the Bank may be increased by the Board Increase, redaction with the previous sanction of the Governor General in and transfer of share capital. Council. (2) Every such increase shall be fully paid up, and the areas to which such further shares shall be allotted and the price at which they may be issued shall be fixed by the Board with the like sanction (3) The Board may determine the manner in which any increase of share capital shall be effected. (4) The share capital of the Bank may be reduced by the Board, with the previous sanction of the Governor General in Council, to such extent and in such manner as may be determined by the Bank in general meeting. Offices and Branches. O. The Head Office of the Bank shall be Head office, branches and agencies. established in Bombay, and the Bank shall, as soon as may be, establish branches in Calcutta, Madras, Rangoon, Delhi and London, and may establish branches or agencies in any other place in India or, with the previous sanction of the Governor General in Council, else-where. 31anagernent of the Bank. 7. The general superintendence of.the affairs and business of the Bank Management. shall be entrusted to a Board of Directors which may exercise all powers and do all such acts and things as may be exercised or done by the Bank and are not by this Act expressly directed or required to be done by the Bank in general meeting. 8. (1) Save as expressly provided in this Act- Qualifications and diequalifications for Directorships. (a) no person may be a Director who is not or has not at some time been(i) actively engaged in agriculture, corna II II II 5 a director of any company as defined in clause (2) of section 2 of the Indian Companies Act, 1913, "VII of 1913 or of a corporation or company incorporated by or under any law for the time being in force in any place outside British India ; and (6) no person may be a Director who is(1) a government official, or (ii) an officer or employee of any bank, ur (iii) a director of any bank, other than a registered society as defined in clause (e) of section 2 of the Cooperative Societies Act, 1912. (2) The election or appointment as Director of any person who is a member of the Indian Legislature or of a local Legislature shall be void, unless within one month of the date of his election or appointment he ceases to be such member, and if any Director is elected or nominated as member of any such .Legislature he shall cease to be a. Director as from the date of such election or nomination, as the case may be. 9. (1) The Board shall consist of the following of the Directors, namely :- Composition Board, aid term of office of Directors. (a) a Governor and two Deputy Governors to be appointed by the Governor General in Council after consideration of any recommendation made by the Board in that behalf ; (b) four Directors to be nominated by the Governor General in Council ; (c) two Directors to be elected by the Associated Chambers of Commerce ; (d) two Directors to be elected by the Federation of the Indian Chambers of Commerce ; (e) one Director, representing the interests of agriculture, to be elected by provincial co-operative banks holding shares to the nominal value of not less than five thousand rupees ; eleven Directors to be elected on behalf of the shareholders on the various registers, in the manner provided in section 10 and in the following numbers, namely :(i) for the Bombay register-three Directors ; kii) for the Calcutta register-three Directors ; (iii) for the Madras register-one Director ; (iv) for the Rangoon register-one Director ; (v) for the Delhi register--three Directors ; and (g) one government official to be nominated by the Governor General in Council. (2) The Governor and Deputy Governors shall devote their whole time to the affairs of the Bank, and shall receive such salaries and allowances as may be determined by the Board, subject to any minimum prescribed by the Governor General in Council. I1 of 1912. 6 (3) The Governor, a Deputy Governor and a Director nominated or elected'under clause (6), (a), (d), (e) or (t) shall hold office for five years, or thereafter until his successor shall have been duly appointed, nominated or elected, and, subject to the provisions of section 8, shall be eligible for re-appointment, re-nomination or re-election, as the case may be. The Director nominated under clause (g) shall hold office during the pleasure of the Governor General in Council. He may attend any meeting of the Board and take part in its deliberations, but shall not be entitled to vote. (4) No act or proceeding of the Board shall be questioned on the ground merely of the existence of any vacancy in, or any defect in the constitution of, the Board. 10. (1) The shareholders registered on the Election of Directors representing shareholders. various registers shall elect delegates for the purpose of electing Directors to repre- sent them on the Board, and the numbers of delegates shall be as follows, namely :-- (a) for the Bombay register-twenty-four members ; (b) for the Calcutta register-twenty-four members ; for the Madras register -t. n members ; (d) for the Rangoon register-ten members ; (e) for the Delhi register-twenty-four mem- (c) bers. (2) Every shareholder who has been registered on a register for not less than six months immediately preceding the election shall he entitled to vote at the election of delegates for the shareholders on that register ; and no shareholder shall have more than one vote. (3) The delegates for the shareholders on a register shall be elected from among those who are shown on that register as having held, for a period of not less than six months immediately preceding the election, unencumbered shares of the Bank of a nominal value of not less than five thousand rupees : Provided that no person shall be elected as a delegate who is a government official or an officer or servant of the Bank : Provided further that no candidate may stand for election, unless he has been nominated by not less than twenty of the shareholders entitled to vote at the election. (4) The election of delegates for the share- holders on a register shall be held once in every five years, at a convenient time before the expiry of the term of office of the retiring Directors for the election of whose successors the delegates are to be elected. (6) Delegates shall hold office for a period of five years : Provided that, if a delegate ceases to be qualified for election under sub-section (3), he shall forthwith cease to hold office as a delegate. (6) A casual vacancy in the office of delegate, in whatsoever manner arising, may be filled by the Board from among the shareholders for the time 7 being qualified for election to that office under sub-section (3,. (7) The delegates for the shareholders on a register shall elect, from among those shareholders, the Directors to represent them on the Board, in accordance with this Act and the rules made under section 13. 11. (I) The Governor General in Council may Removal of Direc- remove from office the Governor, a Deputy Govertors. nor, or any Director nominated or elected under clause (6), ',e), (d), (e) or (/) of sub-section (1) of section 9, on a resolution passed by the Board in that behalf by a majority consisting of not less than fifteen Directors : Provided that, in the case of a Director elected under clause (c), (d), (e) or (1), such resolution shall have been, confirmed by a majority of not less than two-thirds of the persons present and voting at a general meeting expressly called for that purpose. (2) A Director nominated or elected under clause (b), (c), (d), (e) or (/) of sub-section (1) of sectio" 9 shall cease to bold office if, at any time after the expiry of one month from the date of his nomination or election or of eighteen months from the date on which this Act comes into force, whichever is later, he is not registered as a holder of unencumbered shares of the Bank of a nominal value of not less than ten thousand rupees, or if he ceases to hold unencumbered shares of that value. 12. (1) If the Governor or a Deputy Governor by infirmity or otherwise Casual vacancies. is rendered incapable of executing his duties or is absent on leave or otherwise in circumstances not involving the vacation of his apptintment, the Governor General in Council may appoint another Jerson to officiate for him, and such person may, notwithstanding anything contained in clause 16) of sub-section (1) of section 8, Le an officer of the Bank. (2) .A casual vacsney in the office of a Director, other than the vacancies provided for in subsection (1), shall be filled in the manner in which, and by the authority by whom, the nomination or election of the Director vacating office was made ; and the Director so nominated or elected shall bold office for the unexpired ; ortion of the term of his predecessor. 13. The Governor General in Council may, to Power election rides. make after previous publication, make rules to provide for all matters for which provision is in his opinion necessary or expedient for the holding and conduct of elections under this Act, and in particular and without prejudice to the generality of the foregoing power, may by such rules provide(a) for the holding of elections according to the principle of proportional represent- ation by means of the single transferable vote or otherwise as he thinks fit in any case, and (6) for the final decision of doubts or disputes regarding the qualifications of any candidate for election or regarding the validity of elections. S 14. Meetings of the Board shall be convened by the Governor at least six of Meetings Board. the times in each year and at least once in each quarter. Meetings shall ordinarily be held in Bombay, but at least two meetings of the Board shall be held in Calcutta in each year. 15. (1) A general meeting (hereinafter in this Act referred to as the annual General meetings. general meeting) shall be held annually at Bombay within six week. from the date on which the annual accounts of the Bank are closed, and a general meeting may be convened by the Board at any other time. (2) Any shareholder shall be entitled to attend and vote at any general meeting, and no shareholder, whether present in person or voting through another shareholder as proxy, shall have more than one vote. 16. (1) The following provisions shall apply to the first constitution of Temporary provisions. the Board, anti, notwith- standing anything contained in section 9, the Board as constituted in accordance therewith shall be deemed to be duly constituted in accordance with this Act. (2) The first Governor and first Deputy Governors shall be appointed by the Governor General in Council on his own initiative, and shall receive such salaries and allowances as he may determine. (3) The first four Directors nominated under clause (b) of sub-section (1) of section 9 shall hold office for three years. (4) The first four Directors elected under clauses and (d) of that sub-section shall hold office for four years. (c) (6) The first Director elected under clause (e) of that sub-section may be elected by all provincial co-operative banks notwithstanding that shares have not been allotted, and shall hold office for four years. (6) The first. eleven Directors representing the shareholders shall be nominated by the Governor General iu Council after consultation with the Local Governments, and shall hold office for two years. (7) The first elections of Directors under sec- tion 10 shall be held before the expiry of the term of office of the Directors nominated under sub-section (6), and the Directors so elected shall hold office as follows, namely :- (a) the Directors elected on behalf of the shareholders on the Bombay register-fur four years ; (b) the Directors elected on behalf of the shareholders on the Calcutta register- for three years ; (c) the Director elected on behalf of the shareholders on the Madras regis- ter -for five years ; (d) the Director elected on behalf of the shareholders on the Rangoon regis- ter-for five years ; (e) the Directors elected on behalf of the shareholders on the Delhi register-for two years. 9 Bueinese of tke Bank. 17. The Bank shall be authorised to carry on Business which Bank may transact. the and transact the several kinds of business herein- after specified, namely :(1) the accepting of money on deposit without interest from, and the collection of money for, the Secretary of State in Council, the Governor General in Council, Local Governments, banks and any other persons ; (2) (a) the purchase, sale and rediscount of bills of exchange and promissory notes, drawn and payable in India and arising out of bond fide commercial or trade transactions, bearing two or more good signatures, one of which shall be that of a scheduled bank, and maturing within ninety days from the date of such purchase or rediscount, exclusive of days of grace ; (6) the purchase, sale and rediscount of bills of exchange and promissory notes, drawn and payable in India and bearing two or more good signatures, one of which shall be that of a scheduled bank, or a provincial cooperative bank, and drawn or issued for the purpose of financing seasonal agricultural operations or the marketing of crops, and maturing within six months from the date of such purchase or rediscount, exclusive of days of grace : provided that the total face value of bills or notes so purchased or rediscounted shall not at any time exceed one-fourth of the total face value of all bills and notes purchased or rediscounted by the Bank up to that time ; (c) the purchase, sale and rediscount of bills of exchange and promissory notes, drawn and payable in India and bearing the signature of a scheduled bank, and issued or drawn for the purpose of holding or trading in securities of the Government of India or a Local Government, and maturing within ninety days from the date such purchase or rediscount, exof clusive of days of grace ; (3) the purchase from and sale to scheduled banks and persons approved by the Board, in amounts of not less than the equivalent of one lakh of rupees, of the currencies of such gold standard countries as may be specified in this behalf by the Governor General in Council by notification in the Gazette of India, and of bills of exchange (including treasury bills) drawn in or on any place in any such country, and maturing within ninety days from the date of such purchase, exclusive of days of grace ; and the keeping of balances with banks in such countries ; 10 (4) the making of loans and advances, repayable on demand or on the expiry of fixed periods not exceeding ninety days against the security of(a) stocks, funds and securities (other than immoveable property) in which a trustee is authorised to invest trust money by any Act of Parliament or by any law for the time being in force in British India ; (b) gold coin or bullion or documents (c) such bills of exchange and promisas are sory notes eligible for of title to the same; purchase or rediscount by the Bank : provided that the total of the loans and advances against such securities as are referred to in subclause (b) of clause (2) shall not at any time exceed one-fourth of the total loans and advances made by the Bank up to that time ; (d) such bills of exchange as are eligible for purchase by the Bank under clause (3); (e) promissory notes of any scheduled bank or a provincial co-operative bank, supported by documents evidencino. title to goods which have been transferred, assigned, hypothecated or pledged to any such bank as security for a cash credit granted for bond fide commercial or trade transactions, or for the purpose of financing seasonal agricultural operations or the marketing of crops : provided that no loan or advance shall be made on the security of any promissory note such as is referred to in this sub-clause after the expiry of five years from the date on which this section comes into force ; (6) the making of advances to the Governor General in Council repayable in each case not later than three months after the close of the financial year in respect of which the advance has been made ; (6) the issue of demand drafts and the making, issue and circulation of bank post bills made payable on its own branches ; (7) the purchase and sale of securities, matur- ing within five years from the date of such purchase, of the Government of any gold standard country specified in this behalf by the Governor General in Council by notification in the Gazette of India ; (8) the purchase and sale of securities of the Government of India of any maturity, or of a Local Government or of a local authority in British India maturing within ten years from the date of purchase : provided that the amount of such securities held at any time in the Banking Department shall be so regulat- ed that- (a) the total value of such securities shall not exceed the aggregate amount of the share capital of the Bank, the Reserve Fund and two-fifths of the liabilities of the Banking Department in respect of deposits ; 11 (h) the value of such securities maturing after six montl s shall not exceed the aggregate amount of the share capital of the Bank, the Reserve Fund and one-fifth of the liabilities of the Banking Department in respect of deposits ; 12 (16) the making and issue of bank notes subject to the provisions of this Act ; and (16) generally, the doing of all such matters and things as may be incidental or subsidiary to the transaction of the various kinds of business hereinbefore sped. fled. 18. When, in the opinion of the Board, it is Power of direct dis- necessary, or expedient that count. action should be taken under this section in the interests of Indian trade or commerce, or for the purpose of enabling the Bank to perform any of its functions under this Act, the Bank may, notwithstanding any limitation contained in sub-clauses (a) and (b) of clause (2) of section 17, purchase, sell or discount any bills of exchange or promissory notes drawn and payable in India and arising out of bond fide commercial or trade transactions, bearing two or more good signatures and maturing within ninety days from the date of such purchase or discount, exclusive of days of grace. 19. Save as otherwise provided in sections 17, Business which the Bank may not transact. 18 and 45, the Bank may not- (1) engage in trade or otherwise have a direct interest in any commercial, industrial, or other undertaking, except such interest as it may in any way acquire in the course of the satisfaction of any of its claims : provided that all such interests shall be disposed of at the earliest possible moment ; (2) purchase its own shares or the shares of any other bank or of any company, or grant loans upon the security of any such shares ;" (3) advance money on mortgage of, or otherwise on the security of, immoveable property or documents of title relating thereto, or become the owner of immoveable property, except so far as is necessary hr its own business premises and residences for its officers and servants ; (4) make unsecured loans or advances ; (5) draw or accept bills payable otherwise than on demand ; (6) allow interest on deposits or curtent accounts. CHAPTER II I. L BANKING FUNCTIONS. Bank with the Secretary of State Governor General in. Council rnments. shall undertake to accept monies to for account of the Secretary ent of State in Council and the Governor General in Council Governments as may have the agement of their own provincial make payments up to the amount edit of their accounts respective- out their exchange, remittance ing operations, including the he public debt, on such conagreed upon. 13 21. (I) The Governor Gen. ral in Council and to here the such Local Governments as Tight to transact Gov- n ay have the custody and -ernment business. management of their own Bank provincial rel enues shall undertake to ent ust the Bank, on such conditions as may be agreed upon, with .11 their money, remittance, ex. Lange and banking transactions in India and el-ewhere and, in partieul .r, to deposit free of interest all their cash balances with the Bank : Provided that nothing in this sub-section shall prevent the Governor General in Council or any Local Government from carrying on money transactions st government treasurie- or sub-treasuries at places whe e the ltank has no branches or agencies, and the Gov. rnor General in C. un-it and Local Governments may hold at such treasuries and sub-treasuries such balances as they may require. (2) The Governor General in Council and each Local Government shall undertake to entrust the Bank, on such conditions as may be agreed upon, with the management of the public debt and with the issue of any new loans. Note Issue. 22. (1) The Bank shill have the sole right to Right to issue bank -notes. issue paper money in British India, and may, for a period of one year from the date on which this Chapter comes into force, issue currency notes of the Government of India supplied to it by the Governor General in Council, and the provisions of this Act applicable to bank notes shall, unless a contrary intention appears, apply to all currency notes of the Government of India issued either by the Governor General in Council or by the Bank in like manner as if such currency notes were bank notes, and references in this Act to bank notes shall be construed accordingly. (2) On and from the aforesaid date the Governor General in Council shall not issue any currency notes or any other kind of paper money. 23. k1) The issue of bank notes shall be conIssue Department ducted by the Bank in an Issue Department which shall be separated and kept wholly distinct from the Banking Department, and the assets of the Issue Department shall not be subject to any liability other than the liabilities of the Issue Department as hereinafter defined in section 32. (2) The Issne Department shall not issue bank notes to the Banking Department or to any other person except in exchange for ther bank notes or for such coin, bullion or securities as are permitted by this Act to form part of the Reserve. 24. Bank notes shall be of the denominational Denominations of notes. values of five rupees, ten rupees, fifty- rupees, one hundred rupees, r ve hundr. d rupees, one thousand rupees and ten thousand rupees, and of such other denomirational values, if any, as may be directed by the Governor G, neral in Council. 25. The design, form and material of bank notes shall be such as may .Form or b nk notes. be approved by the Governor General in Council. 14 26. (1) Subject to the provisions of sub-section (2), every bank note shall be Legal tender character legal tender at any place in of notes. British India in payment or on account for the amount expressed therein,_ and shall be guaranteed by the Governor General. in Council. (2) The Governor General in Council may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender save at an office or agency of the Bank. 27. Any bank note re-issued from any office of the Bank shall be sterilized Re-issue of notes. and disinfected before reissue, and the bank shall not re-issue bank notes which are torn, defaced or excessively soiled. 28. Notwithstanding anything contained in any Recovery of notes lost, stolen, or mutilated imperfect. enactment or rule of law to the contrary, no person shall of right be entitled to recover from the Governor General in Council or the Bank the value of any lost, stolen, mutilated or imperfect currency note of the Government of India or bank note : Provided that the Bank may, with the previous sanction of the Governor General in Council, prescribe the circumstances in, and the conditions and limitations subject to, which the value of such currency notes or bank notes may be refunded as of grace. Prohibition of issue of private bills or notes payable to bearer on demand. 29. No person in British India other than the Issue of demand bills and notes. Bank or, as expressly authorised by this Act, the Governor General in Council shall draw, accept, make or issue any bill of exchange, hundi, promissory note or engagement for the payment of money payable to bearer on demand, or borrow, owe or take up any sum or sums of money on the bills, hundis or notes payable to bearer on demand of any such person : Provided that cheques or drafts payable to bear- er on demand or otherwise may be drawn on a person's account with a banker, shroff or agent. 30. (1, Any person contravening the proviPenal ty. sions of section 29 shall, on conviction by a Presidency Magistrate or a Magistrate of the first class, be punishable with fine equal to de amount of the bill, hundi, note or engagement in respect whereof the offence is committed. (2) No prosecution under this section shall be instituted except on complaint made by the Bank. Assets of the Issue Department. 31. (1, The Reserve shall consist of gold coin,. gold bullion, gold securities, The Reserve. rupee coin and rupee securities to such aggregate amount as is not less than the total of the liabilities of the Issue Department as hereinafter defined. (2) Of the total amount of the Reserve, not than two-fifths shall consist of gold coin,. gold bullion or gold securities .15 Provided that the amount of gold coin and gold shall not at any time be less than thirty crori s of rupees in value, and shall not be bullion less than one-fifth of the total amount of the Reserve after the end of the fifth year, or than one-quarter of the total amount of the Reserve after the end of the tenth year, from the date on which this Chapter comes into force. (3) The remainder of the Reserve shall be held in rupee coin, Government of India rupee securi- ties of any maturity and such bills of exchange and promissory notes drawn and payable in British India as are eligible for purchase by the Bank under sub-clause (a) or sub-clause (6) of clause (2) of section 17 or under section 18 : Provided that the amount held in rupee coin shall not exceed(a) during the three years after the date on which this Chapter comes into force, (6) ninety-five crores of rupees, during the next three years, seventy-five crores of rupees, (e) during the next four years, sixty crores of rupees, and (4) fifty crores of rupees thereafter, or one-tenth of the total amount of the Reserve, whichever am' unt is greater : Provided further that the amount held in Government of India rupee secnritiss shall not at any time exceed one-fourth of the total amount of the Reserve or fifty crores of rupees, whichever amount is less. (4) For the purposes of this section, gold coin and gold bullion shall be valut-d at 8.47512 grains of fine gold per rupee, rupee coin shall be valued at Its face valve, and gold and rupee securities shall be valued at the market rate for the time being obtaining. (51 Of the gold coin and gold bullion held in the 'Reserve not less than seventeen-twentieths shall be held in British India, and all gold coin and gold bullion forming part of the Reserve shall be held in the custody of the Bank or its agencies : Provided that gold belonging to the Bank which is in any other bank or in any mint or treasury or in transit may be reckoned as part of the Reserve. (6) For the purposes of this section, the gold securities which may be held as part of the Reserve shall be securities of any of the following kinds payable in the currency of any of such gold standard countries as may be specified in this behalf by the Governor General in Council by notification in the Gazette of India, namely :(a) balances at the credit of the Issue De- partment with a bank which is the principal currency authority under the law for the time being in force of such country, or with any of the Federal Reserve Banks in the United States of America ; (6) bills of exchange bearing two or more good signatures and drawn on and payable at a place in any such country and having a maturity not exowding ninety days ; 16, (e) securities maturing within five years of the Government of any part of His Majesty s dominions which is a g Id stun and countrl or of any oth'r void standard con try sp.cilied in this brhalf by the Governor General in Council by notification in the Gazette of India : Provided that, for a period of two years from the date on which this Chapter comes into force, - (1) any of such last- mentioned securities may be securities maturing after five years, and the Bank may, at any time before the expiry of that period, dispose of such securities notwith standing anything contained in section 17, and (ii) sterling securities of the Government of India may be held as part of the Reserve. Liabilities of the Issue Department. 32. (I) The liabilities of the Issue Department Liabilities. shall be an amount equal to the total of the amount of the currency notes of the Government of India and bank notes for the time being in circulation and of an initial amount of forty crores of rupees for the purpose of providing for rupee redemption, which last-mentioned amount shall be reduced by one rupee for every five rupees delivered to the Governor General in Council under the provisions of section 34, and shall be increased by one rupee for every five rupees received from him under section 35. (2) For the purposes of this section, any currency note of the Government of India or bank note which has not been presented for payment within forty years from the 1st day of April follow- ing the date of its issue shall be deemed not to be in circulation, and the value thereof shall, notwith, tending an3thing contain d in subsection 2, of section 23, be paid by the Issue Department to the Governor General in Council or the Banking Department, a the case may be ; but any such note, if subsequeffhly resented for payment, shall be paid by the Banking Department, and any such payment in the case of a currency note of the Government of India shall be debited to the Governor General in Council. Initial Assets and Liabilities. 33. On the date on which this Chapter comes Trfin.fer of assets and liabilities to the Bank. into force, the Issue Depart- ment shall take over from the Governor General in Council the liability for all the currency notes of the Government of India for the time being in circulation, and the Governor Gen, sal in Council shall transfer to the Issue Department gold coin, gold bullion, gold securities, rupee coin and rupee securities to such aggregate amount as is equal to the total of the amount of the liability so transferred and of a sum of forty crores of rupees. The coin, bullion and securities shall be transferred in such proportion as to comply with the requirements of section 31 : 17 Provided that the total amount of the gold coin, gold bullion and gold securities so transferred shall not be less than one-half of the whole amount transferred. Supply of coin, and of different forms of legal tender currency. 34. The Bank may deliver to the Governor Delivery to Governwent of surplus rupee coin. General in rupee coin Council all held by it in excess of the amount which the Issue Department is permitted to hold as part of the Reserve under section 31, against payment of four rupees in bank notes, gold or gold securities for every five rupees so delivered. 35. When the amount of rupee coin for the Purchase coin. rupee of time being held in the Reserve does not exceed twenty-five crores of rupees, or one-tenth of the total amount of the Reserve, whichever is greater, the flank may demand delivery of rupee coin from the Governor General in Council, on payment of four rupees in bank notes, gold or gold securities for every five rupees so delivered. 36. The Governor General in Council shall Obligations of Governk in ment and rest pecof rupe e coin undertake not to re-issue any rupee coin delivered under 34 nor section to put into circulation any new rupees, except through the Bank and on the Bank's demand ; and the Bank shall undertake not to dispose of rupee coin otherwise than for the purposes of circulation or by delivery to the Governor General in Council under that section. 37. The Bank shall issue rupee coin on Obligation to supply different forms of currency. demand in exchange for currency notes of the Government of India, and currency notes or bank notes on demand in exchange for coin which is legal shall issue tender under the Indian Coinage Act, 1906, and III of 1906. it shall, in exchange for currency notes or bank notes of five rupees or upwards, supply currency notes or bank notes of lower value or rupees or other coins which are legal tender under the Indian Coinage Act, 1906, in such quantities III of 1906. as may, in the opinion of the Bank, be required for circulation ; and the Governor General in Council shall, subject to the provisions of section 35, supply such rupees or other coins III of 1906. If the Governor General in Council at any time fails to discharge to the Bank on demand. this duty, the Bank shall be released from its obligations to supply such coins to the public. Obligation to sell gold and gold exchange. 38. (1) The provisions of this section shall have effect from such date, Sale of gold, not later than the 1st day Governor General in Council may, by notification in the Gazette of India, appoint : Provided that the Governor General in Council may, by notification in the Gazette of India stating his reasons for such action, substitute for the year 1931 in this section the year 1932 ; and of July, 1931, as the 18 may, by like notifications, make two further successive substitutions of the years 1933 and 1.934. (2) The Bank shall sell gold bullion for deli- very in Bombay to any person who makes a demand in that behalf at its office at Bombay, Calcutta, Madras, Rangoon or Delhi and pays in legal tender currency the purchase price as determined under the provisions of this section: Provided that no person shall be entitled to demand an amount of gold bullion containing less than two hundred and fifty tolas of fine gold. (3) The price of gold bullion for delivery in Bombay shall be twenty-one rupees, three annas and ten pies per tola of fine gold with an addition representing twice the normal cost per tola of transferring gold bullion in bulk from Bombay to such place in a gold standard country as may be specified in this behalf by the Governor General in Council by notification in the 'Gazette of India, including interest on its value during transit : Provided that no such addition shall be made when the rate at which the currency of the country in which the place so specified is situate can be purchased in Bombay for immediate delivery at that place is such that the equivalent of the price at which the principal currency authority of that country is bound by law to give gold in exchange for currency is less than twenty- one rupees, three annas and ten pies per tola of fine gold by an amount equal to or greater than the normal cost per tola of transferring gold bullion in bulk from the specified place to Bombay, including interest on its value during transit. (4) The Governor General in Council shall, from time to time, determine in accordance with the provisions of sub-section (3) the price at .which the Bank shall sell gold bullion for deli- very in Bombay, and shall notify the price so determined in the. Gazette of India. Such notification shall be conclusive as between the Bank and any other person as to the price which the Bank shall be entitled to charge in respect of any sale of gold bullion. 39. (1) The Bank shall sell, to any person who. makes a demand in that beSale of gold exchange. half at its office at Bombay, Calcutta, Madras, Rangoon or Delhi and pays the purchase price in legal tender currency, at a rate equivalent to twenty-one rapees, three annas and ten pies per tola of fine gold, the currency of such gold standard country as may be notified in this behalf by the Governor General in Council in the Gazette of India, for immediate delivery in that country : Provided that no person shall be entitled to demand an amount of currency of less value than that of two hundred and, fifty tolas of fine gold. (2) For the purpose of determining the equivalent rate applicable to the sale of currency under this section, twenty-one rupees, three annas and ten pies shall be deemed to be equivalent to such sum in that currency as is required purchase one tola of fine gold in that country at the rate at which the principal currency authority of that country is bound by law to give currency in exchange for gold, after deduction. 19 therefrom of an amount representing the normal cost per tola of transferring gold bullion in bulk from Bombay to that country, including interest on its value during transit. (3) The Governor General in Council shall, from time to time, determine the equivalent rate in accordance with the provisions of sub-section (2), and shall notify the rate so determined in the Gazette of India. Obligation to bred. gold. 40. The Bank shall buy, from any person who makes a demand in that be-, half at its office in Bombay, Calcutta, Madras, Rangoon or Delhi, gold bullion for delivery in Bombay at the rate of twenty-one Obligation of Bank to buy gold. rupees, three annas and ten pies per tat of fine gold, if such gold is tendered in the form of bars containing not less than two bundled and fifty tolas of fine gold : Provided that the Bank shall be entitled to require such gold bullion to be melted, assayed and tefined, by persons approved by the Bank, at the expense of the person tendering the bullion. Suspension of Reserve requirements and tax on note issue. may, with the previous sanction of the Governor General' in Council, for periods not exceeding thirty days in the first instance, which may, with the like sanction, be 41. (1) The Bank Suspension of Reserve requirements. extended from time to time by periods not exceeding fifteen days, hold in the Reserve gold coin, gold bullion or gold securities of less a2-gregate amount than that required by sub-section (2) of section 31 and, whilst the holding is so reduced, the proviso cease to be operative. to that sub-section shall (2) In respect of any period during which the holding of gold coin, gold bullion and gold securities is reduced under sub-section the Bank shall pay to the Governor General in Council a tax upon the amount by (1), which such holding is reduced below the minimum prescribed by sub-section (2) of sec- tion 31 ; such tax shall be payable at the bank rate for the time being in force, with an addition of one per cent. per annum when such holding exceeds thirty-two and a half per cent. of the total amount of the Reserve and of a further one and a half per cent. per annum in respect of every further decrease of two and a half per cent. or part of such decrease : Provided that the tax shall not in any event be payable at a rate less than six per cent. per annum. 42. The Bank shall not be liable to the payment of any stamp duty under the Indian Stamp further note tax. Act, 1899, in respect of 11 of 1899. bank notes issued by it. Rank exempt from Duration of the privilege of note issue. 43. If at any time the Bank fails to comply with any provi,4ion of this Chapter or with any went in respect of note Powers of Govern- issue and assets of the Bank in certain cirenmstances. other provision of this Act, the Governor General in Council may, by notification 20 in the Gazette of India, declare that the Bank has forfeited the right of note issue, and shall thereupon take over the liabilities of the Issue Department, together with such portion of the assets of the Bank as is required to meet such liabilities, and thereafter the business of the Issue Department shall be 2.arried on in the manner prescribed by this Act by such agency as the Governor General in Council may determine. Cash reserves to be maintained by banks. 4. (1) Every scheduled hank shall maintain a balance with the Reserve Cash reserves of cer- Bank the amount of which wain b.inks to be kept shall at no time be less than with the Bank. seven and one-half per cent. of the daily average of the demand, and two and one-half per cent. of the daily average of the time liabilities of such bank in India. (2) For the purposes of sub-section (1), the daily average of the amounts of the demand and time liabilities of each ' cheduled bank shall be computed in respect of each period ending on the fifteenth and on the last day of each month. (3) Every such bank shall send to the Governor General in Council and to the Bank a monthly return, signed by two responsible officers of such bank, showing(a) the amounts of its demand and time liabilities respectively in India, (e) the total amount held in India in currency notes of the Government of India and bank notes, the amounts held in India in rupee coin (d) the amounts of advances made and of (b) and subsidiary coin respectively, bills discounted in India respectively, and (e) the balance held at the Bank, at the close of the month to which the return relates. (4) Every such return shall be sent not later than fourteen days after the close of the month to which it relates, and shall state whether the bank has during that month maintained with the Reserve Bank the minimum balance required by sub-section (1). (5) Any bank failing to comply with the pro- visions of sub-section (3) or sub-section (4) shall be liable, on application made by or on behalf in Council to the of the Governor General having jurisdiction in a principal Civil Court office of the bank is situated, where an place rupees for each hundred of one to a penalty day during which the failure continues. (6) When it appears from any such monthly return or from a report of the Board that any scheduled bank has failed to maintain the minimum balance required by sub-section (1), the Governor General in Council may call for such further return, or make such inspection of the books and accounts of that bank, as may be 41P they have called for any explanation or information from the Board, whether it has been given and whether it is satisfactory. Any such report made to he shareholders shall be read, together with the report of the board, at the annual general meeting. Returns. 51. (1) The Bank shall prepare and transmit to the Governor General in Returns. Council a weekly account of the Issue Department and of the Banking Department in the form set out in the Fourth Schedule or in such other form as the Governor General in Council may, by notification in the Gazette of India, prescribe. The Governor General in Council shall cause these accounts to he published weekly in the Gazette of India. (2) The Bank shall also, within two months from the date on which the annual accounts of the Bank are closed, transmit to the Governor General in Council a copy of the annual accounts signed by the Governor, the Deputy. Governors and the Chief Accounting. Officer of the Bank, and certi- fied by the auditors, and the Governor General in Council shall cause such accounts to be published iu the Gazette of India. (3) The Bank shall also, within two months from the date on which the annual accounts of the Bank are closed, transmit to the Governor General in Council a statement showing the name, address and occupation of, and the number of shares held by, each shareholder of the Bank. 52. (1) Nothing in the Indian Companies Act, Provision regarding 1913, shall apply to the VI/ d 1919. application of Act vII Bank, and the Bank shall not be placed in voluntary or compulsory liquidation save with the sanction of of 1913 and liquidation. the Governor General in Council and in such manner as he may direct. (2) In such event the Reserve Fund and surplus assets, if any$ of the ,Bank shall be divided between the Governor General in Council and the shareholders in the proportion of seventy-five per eent. and twenty-five per cent., respectively. Regulations. 53. (1) The Board may, with the previous Power of the Board to make regulations. sanction of the Governor General in Council, make regulations consistent with this Act to provide for all matters for which provision is necessary or convenient for the purpose of giving effect to the provisions of this Act. (2) In particular and without prejudice to the generality of the foregoing provision, such regulations may provide for all or any of the following matters, namely :(a) the maintenance of the share register, the manner in which and the conditions subject to which shares may be held and transferred, and, generally, 24 all matters relating to the rights and duties of shareholders ; (b) the manner in which general meetings shall be convened and the procedure to be followed thereat ; (c) the manner in which notices may be served on behalf of the Bank upon shareholders or other persons ; (d) the manner in which the business of the Board shall be transacted, and the procedure to be followed at meetings thereof ; the establishment of Local Boards and (e) (f) the delegation to such Boards of powers and functions ; the constitution and management of staff and superannuation funds for the officers and servants of the Bank ; the manner and form in which contracts binding on the Bank may be executed; (h).,ithe provision of an official seal of the (8) Bank and the manner and effect of its use; (1):the manner and form in which the balance-sheet of the Bank shall be drawn up, and in which the accounts shall be maintained ; U) the circumstances in which, and the conditions and limitations subject to which, the value of any lost, stolen, mutilated or imperfect currency note of the Government of India or bank note may be refunded; and (k) generally, for conduct of the business of the Bank. Amendments and Repeal. 54. In the Indian Coinage Act, 1906, for sec- III of 1906. tion 1 I the following sec: 1906. tion shall be substituted, Amendment of Act III of namely :"11. Gold coins, coined at His Demonetisation of sorereign and half-sovereign. Majesty's Royal Mint in England or at any mint estab-' lished in pursuance of a proclamation of His Majesty as a branch of His Majesty's Royal Mint, shall not be legal tender in British India in payment or on account, but such coins shall be received by the Reserve Bank of India at its offices and agencies in India at the bullion value of such coins calculated at the rate of 8'47512 grains troy of tine gold per rupee." The Indian Paper Currency Act, 1923, and X of 19311. the Currency Act, 1927, are IV of 1927' Repeals. hereby repealed. 25 THE FIRST SCHEDULE. [See section 2 (m).] SCHEDULE OF BANKS. Ajodhia Bank, Fyzabad. Allahabad Bank. American Express Company Incorporated. Banco Nacional Ultramarino. Bangalore Bank. Bank of Baroda. Bank of Behar. Bank of India, Bombay. Bank of Morvi. Bank of Mysore. Bank of Taiwan. Bari Doab Bank, Lahore. Benares Bank. Bhargava Commercial Bank. Bhowanipore Banking Corporation, Calcutta. Bombay Merchants' Bank, Bombay. Byopar Sahayak Bank, Meerut. Canna Bank. Central Bank of India. Chartered Bank of India, Australia and China. Chota Nagpur Banking Association. Coimbatore To mu Bank. Comptoir National d'Escompte de Paris. Dawsobs Bank, Pyapon. Eastern Bank. Equitable Eastern Banking Corporation. Grind lay and Company. Hongkong and Shanghai Banking Corporation. Imperial Bank of India. Imperial Bank of Persia. Indian Bank. Industrial Bank of Western India. Jalpaiguri Banking and Trading Corporation. Karachi Bank, Karachi. Karnani Industrial Bank. Lloyds Bank. Lvallpur Bank. Mercantile Bank of India. Mitsui Bank. Muffassil Bank, Gorakhpur. Mysore Industrial Bank. Namboodiri Bank, Pallippuram. National Bank of India. National City Bank of New York. Nederlandsche Indische Handels-bank. Nederlandsche Handel-Maatsehappij. Nedungadi Bank, Calicut. Oudh Commercial Bank. P. and 0. Banking Corporation. People's Bank of Northern India. Punjab and Kashmir Bank, Rawalpindi. Punjab and Sind Bank, Amritsar. Punjab Co-operative Bank. Punjab National Bank. Shilotri Bauk, Bombay. Simla Banking and Industrial Company. South India Bank, Tinnevelly. Sumitomo Bank. Thomas Cook & Sons. Union Bank of India. U. Rai Gyaw Thoo and Co., Akyab. Yokohama Specie Bank. S THE SECOND SCHEDULE. (See section 45.) Provisions to be contained in the agreement between the Reserve Bank of India and the Imperial Bank of India. 1. The Imperial Bank of India shall be the sole agent of the Reserve Bank of India at all places in British India where there is a branch of the Imperial Bank of India and no branch of the Banking Department of the Reserve Bank of India. 2. In consideratiOn of the performance by the Imperial Bank of India on behalf of the Reserve Bank of India of the functions which the Imperial Bank of India was performing on behalf of the Governor General in Council at the places referred to in clause 1 before the coming into force of the Reserve Bank of India Act, 1928, the Reserve Bank of India shall pay to the Imperial Bank of India a commission calculated on the total of the receipts and disbursements dealt with annually on account of Government by the Imperial Bank of India on behalf of the Reserve Bank of India. Such commission shall be one-sixteenth of one per cent. on the first 250 crones of such total and one-thirty-second of one per cent. on the remainder. 3. Subject to the condition that the Imperial Bank of India shall keep open branches not less in number than those existing at the time of the coming into force of the Reserve Bank of India Act, 1928, the Reserve Bank of India shall allow the following balances to the Imperial Bank of India at the interest rates hereinafter specified, namely : (a) during the first five years from that time-3 crones free of interest ; (b.) during the next five years-2 crones free of interest and, at the option of the Imperial Bank of India, an amount not exceeding 1 crone at 2 per cent. per annum ; (c) during the next five years-1 crone free of interest sand, at the option of the Imperial Bank of India,.an amount not exceeding 2 crones at 2 per cent. per annum; and (d) during the next five years-at the option of the Imperial Bank of India, an amount not exceeding 3 crores at 2 per cent. per annum. 4. The Imperial Bank of India shall not without the approval of the Reserve Bank of India open any branch in substitution for a branch existing at the time this agreement comes into force. - 26 THE THIRD SCHEDULE. (See section 46.) Scale of additional dividend payable to shareholders. A. So long as the share capital of the Bank is five crores of rupees(1) if the surplus does not exceed four crores of rupees-Nil; (2) if the surplus exceeds four crores of rupees(a) out of such excess up to the first one and a half crores of rupees-a fraction of one-thirtieth ; (b) out of each successive additional excess up to one and a half crores of rupees-one-half of the fraction payable out of the next previous one and a half crores of excess : Provided that the additional dividend shall be a multiple of one-eighth of one ler cent. on the share capital, the amount of the surplus allocated thereto being rounded up or down to the nearest one-eighth of one per cent. on the share capital. B. When the original share capital of the Bank has been increased or reduced, the additional dividend shall be calculated in the manner provided in clauses (1) and (2) above, but the fraction of onethirtieth mentioned in sub-clause (a) of clause (2) shall be increased or diminished in proportion to the increase or reduction of the share capital. THE FOURTH SCHEDULE. (See section 51.) RESERVE BANK OF INDIA. An Account pursuant to the Gold Standard and Reserve Bank of India Act, 1928, for the on the day of we ek ending Issue Department. Assets. Liabilities. R.. Rs. Bank Notes held in the Banking Department . Bank Notes in circulation . Total Bank Notes issued . Rupee coin . . . ' Government of India rupee securities . . paper NOMIIP IIIMM111..w. per cent. Ratio of gold and gold securities to liabilities, day of 19 Banking Department. Liabilities. . Assets. its. Rs. . . . . ment .. . . . Notes . Rupee coin Subsidiary coin . Bills discounted. . (a) Internal . (b) External . . . . . . . . . . . . . . (e) Government of India Treasury Bills . . . . Balances held abroad Loans and advances to the Government . Other loans and advances . . Investments . . . . . . Other assets . Dated the day of 19 . . . . Internal Bills of Exchange and other commercial Gold securities . . Government of India Note,' in circulation Gold coin or bullionRupee redemption (a) held in India (b) held outside India Datod the . . . . . . STATEMENT OF OBJECTS AND REASONS. 1110 PART I. A Bill to give effect to the recommendations of the Royal Commission on Indian Currency and Finance, 1926, proposing the establishment of a Reserve to control the Gold Standard forBank India of andIndia the constitution of aoperation cif the Gold Standard was introduced in the Legislative Assembly on the 26th January, 1927. The initiation of this measure by the Government of India and the discussions which followed both inside and outside the Legislature revealed a general consensus of opinion that the establishment of a Central Bank is desirable in order to secure for India independent control, conducted with reference only to correct banking and commercial principles, of her financial and monetary policy, and revealed at the same time wide divergence of views as to the best means by 1% hick, in removing the present governmental control, the risk of domination by sectional interests of one kind or another may be avoided. The consideration of the aforesaid Bill clause by clause was entered upon during the last session of the Legislative Assembly in Simla. After the House had considered the first few clauses, the Government of India decided, for the reasons given by the Finance Member on the 8th Septem- ber 1927, not to proceed with the further consideration of the Bill during that session. The tion hitherto attempted, the Government of India consider it desirable to ensure that ample oppor- tunity is given for study of their present pro- posals with a view to their being passed into law in the approaching session of the Legislature. For these reasons the Government of India have decided to publish the revised Bill befOre the commencement of the session and they will take Finance Member statedopportunity that the Government had the first of bringing from the first before held the that Assembly. the soundest it formally theopinion Legislative arrangement would be that the constitution of the Bank should be founded upon the subscription consequent of capital by shareholders and the PART II. interest of shareholders to see that the affairs of the Bank are conducted in accordance with Clause 1.-It is proposed tostrict give the Rank the This is of twentybusiness principles and not otherwise. sole right of note issue for a period the one plan which has been found to be wholly five years in experience the first instance and to provide of central satisfactory byfor practical renewal as recommended in paragraph 141 Finance The provision countries : and the report. banking in other of the Royal Commission's Member further thatcome the alternative that indicated the Act shall intoofforce not later than methods of constituting the Reserve Bank India 1stdirectorate January, 1929, in the Bill circulated in Janbeen and forming itsuary, 1027, waswhich basedhad upon the protime-table recom., posed during'mended the discussions on the Billinhad by the Commission paragraph 165 raised difficultofand controversial which by the Joint the report. Thequestions Bill as amended required time Committee for further careful examination advanced the date of for starting the the whole issue.Bank by six months. It has now for various During the reasons intervalbecome that haSimpracticable since elapsed tothe prescribe a fixed Government date of India, consultation with the to the effect and ainproviso has been added Secretary of State, carried outtothethefurther that ithave should b, open Governor General review for which postponement of the to discussion in Council, for reasons be stated, to postpone of the Bill was to beofnecessary : and thefound operation this clause for ainyear at a time doing so, they havetogiven full weight to the of three years. subject a maximum postponement practical considerations which had been urged against the adoption of their owndefinition initial planofand Clause 2.-The Provincial Cooperative Bank in the Bill as amended by the to the alternative suggestions which had been the end while they have come to the made. JointInCommittee included companies registered conclusion that shareCompanies capital affords the only under the Indian Act, 1913, under a satisfactory basis for thethat constitution of a Reserve misapprehension the Punjab Co-operative BankBank for India, at the same time, they haveconnected found registered under that Act was embody incredit the fabric of a In shareit possible the new with the to Co-operative system. the been arrangements holders bank such the essence of have definition companies excluded and which opinion provision in the Legislative Assembly additional has been made to had include claimed to be necessary in orderunder to make it cer- Coprovincial banks registered Provincial tain,operative so far asActs. this is possible, that the Reserve Bank should ensue the interests of India as a Claw 3.-The name, the Reserve Sauk of India, is that suggested in paragraph 92 of the Royal Commission's report. Clause 4. --The Royal Commission recom- mended that the capital of the Bank should be rupees five crores fully paid up, and that the Imperial Bank's shareholders should be given the first opportunity of subscribing for the capital stock of the Bank as consideration for foregoing important privileges which the Imperial Bank now enjoys. A clear-cut division of functions between the Reserve Bank of India and the Imperial Bank of India is the essence of the proposal creating a Reserve Bank and it is undesirable to give the shareholders of the Imperial Bank of India a preponderant voice in deciding the currency policy of the Reserve Bank. It is, therefore, proposed, for this reason and in view also of the agreement contemplated by the Second Schedule, not to give the Imperial Bank of India the option of subscribing thirty per cent. of the capital. Sub-clauses (2), (3), (6), (7) and (8) provide for a broadbased distribution of the share capital both at the time of original allotment and subsequently, and is intended to be a safeguard against the control of the Bank by sectional interests of any kind. Sub-clause (4) is intended to meet the objection that the utility to India of a share capital bank might be endangered by a possible conflict of interest, within the management of the bank, between Indian and external capital. Provision has also been made for the transfer of portions of the share capital front one area to another in the event of the shares assigned to any area not bring fully taken up at the time of original allotment. It is necessary that the Government should be prepared to take up any unallotted shares, but it is not desirable that these should continue to be held permanently by Government. It is, therefore, proposed that the Governor General in Council :mould dispose of such shares as soon as possible. Clause 5.-This is based on paragraph 101 of the Royal Commission's report. It is necessary to make provision for the contingent necessity of reducing the share capital and for the regional distribution of any increase in share capital, in regard to which the Commission have made no recommendation. Clause 6.-The Head Office of the Bank will be located in Bombay as recommended by the Commission in paragraph 97 of the report. Delhi has been added to the list of places where the Bank may establish <branches in view of the proposed creation of the Delhi register under clause 4. Clause 8. -This gives effect to the recommendations in paragraphs 95 and 96 of the Royal The Joint Committee Commission's report. omitted the original provision prohibiting members of the Indian or local Legislatures from being nominated or elected as directors of the Bank. This provision has been reintroduced by subclause ('2) of this clause for reasons which have been fully explained in previous discussions. Sub-clause a(i) which was added to the previous Bill by the Joint Committee on the precedent of clauses contained in certain other enactments establishing central banks, provides that no per- son may be a director who is not or has not at some time been actively engaged in agriculture, commerce, finance or industry. Clause 9.-This is derived from paragraph 94 of the Royal Commission's report. The Co mission recommended therein that the Reserve Bank should have Local Boards in Bombay, Madras and Calcutta, and that representatives from these Boards should constitute a majority on the Central Board. The Local Boards have now been replaced by the five bodies of delegates one for each of the five areas mentioned in Clause 4. Provision has been made for the representation of commercial and agricultural interests and the term of office of all directors has been fixed at five years. As it would be undesirable that all the directors should vacate office at the same time, varying periods of tenure have been fixed in Clause 16 for directors nominated or elected at the outset. Clause 10.-This clause provides for the elect- ion of directors by the shareholders through a body of delegates elected for this purpose. Qualifications for election as delegates and directors are also prescribed and the provision that no share- holder shall have more than one vote is intended to ensure protection for the small shareholder. Clause 11.-It is provided in this clause. that the Governor, a Deputy Governor or any nominated or elected director may be removed by the Governor General in Council if a resolution to that effect is passed by a majoi ity of the Board consisting of not le-s than 15 directors. The additional provision for the removal of elected directors follows the lines of a similar provision in the Imperial Bank of India Act. It seems undesirable that elected directors should be removable by a bare majority at a general meeting. It is proposed that directors other than the Governor, Deputy Governors and the nominated official shall cease to hold office if they do not obtain within a month of appointment or if subsequently they cease to possess the required number of shares. This restriction does not however come into force immediately as it is necessary to give sufficient time to directors to qualify themselves by purchase of shares in the open market. Clause 12.-The fixation of a period of five years for the tenure of the directors makes it necessary to provide for casual vacancies. Clause 13.-This clause introduces a necessary provision for the holding and conduct of elections and the final decision of doubts or disputes. Clause 14.-The Joint Committee proposed in the previous Bill that the minimum number of meetings to be held by the Board in This has now been reduced to six in view of the new proposal that the Board must include directors from every part of India. It is also proposed to prescribe that as a minimum two meetings of the Board should be held each year In Calcutta, in view of each year should be twelve. the commercial importance o£ that city. Clause 15.-This is an obviously necessary provision and is based on paragraph 98 of the Royal Commission's report. The power of voting 'by proxy has been rigorously limited in -order to ensure that the policy of the Bank shall not 4 4 held at the time24#. at which Royal Comeeissioti Clause -Thisthe gives effect to the recomopen to is Commission's mademendation their recommendations. in paragraph 142 It of the gravereport. doubt whether it would be possible without for a Freedom is retained to postpone a serious the silver the posttimedisturbance the issue ofofone rupee markets notes if of such worldponement to dispose of this surpluswith silver withinto the appears desirable reference tly rupees for this a period years. ofPa, size of of ten die holding silver in reason the Reserve. and pertly because of thetoobligation imposed on by Provisions relating a gold mohur introduced to for the Bank by clause 37 to supply the Joint Committee haverupees been iretly removed the public in such as fully may explained be requiredin prereasons whichquantities have been for circulation, the limits of the amount of rupee vious discussions. coin which may be -This held atgives various periods in the the recomClause 25. effect toeach. Reserve have been increased by 25 crores mendation in paragraph 155 of the Commission's Sub-clause 5.-The proportion of the gold coin report regarding the form and material of bank and gold bullion held in the Reserve which must notes. be keptClause in British Indiaishas been raised to 85 26.-This based upon the recommendper cent. The raising of the proportion to this in paragra: h 149 of the Commission's extentation has been rendered possible largely by the report of thatthethe notes offor thethe Bank be legal elimination provision saleshall of gold tender for the payment of any amount and shall for delivery outside India which was recommended The be guaranteed by the teovernment of Lelia. by theguarantee Commission. ensures the confidence of the public in Sub-clause the bank 6.-The notes. Joint Committee wished to prohibit the holding in the Reserve of paragraph The Commission recommended in bills drawn foreign good of exchange onthat, 141 of their repot not later thanstandfive years ard countries as an unnecessary and undesirable from the date of the Bank Charter becoming feature of a gold reserve. But theofprovision to still operative, the Government India notes whichoutstanding the Joint Committee objected appears should cease to be legalintender Statutes regulating the condui t of other central It may be except at Government treasuries. banks,presumed and the Government of India areyears satisfied that by the end of five very few that the same liberty should be given to the outstandReGovernment of India notes will remain serve Bank of India. ing : but it wouid be undesirable to take away Clause 32.-This givescharacter effect to the the legal tender of recommendsuch note in the the Commission's ation absence in paragraph of any 146 very of definite advantage to be reportgained defining liabilities the Issue DepartNoofprovision to the effect by the so doing. ment suggested The initial amount ofmade.. 50 croresItofis, rupees however, is therefore for theproposed purpose to of take providing redemption powerfor forrupee the Governor General recommended has however series if in Councilby tothe callCommission in notes of particular now been altered necessity arises.to 40 crores. The original figure was based ou an estimate indicating the155 of Clause 27.-This is based on paragraph total amount of rupees that might be spared from the Commission's report regarding the re-issue of circulation as about 250 crores. In view of the bank notes. changes now proposed as regards the permissible Clausein28. is based a similar silver holding the-This Reserve and ofuron the return of proAct, 1923, in the Indian Paper rupeesvision from circulation since theCurrency Royal Commisand is necessary to protect Bank against a sion reported, it is considered safethe to reduce the notes lost, stolen, action in respect figurecivil for rupee redemption to 40of crores of rupees. mutilated or imperfect. The present practice by Thewhich provision in sub(2) ofinto thistwo clause is and a note may clause, be divided halves similar that inwhen the proviso to sub -section (6) as thetohalves pined together are accepted of section of the Indian Paper Currency Act, legal 18 tender remains unaffected. 1923, although it differs in detail. Under the based upon Clauses 29 and 30.-These areof denoIndian Paper Currency Act, 1923, notes similar provisions in the Indian Paper minational value exeeeding Rs. 100 cannotCurrency be clause has been proviso inuntil Act,to1923. deemed be not The in circulation 10029 years altered the form in which it stood for many after the datefrom of issue, whereas notes of lower years in order to make it clear that cheques denominations are so deemed after 40 years. upon a bankingbetween accountthe arehither not prohibited by that This distinction and the lower clause, even though the account may be denominations of notes is undesirable. In prac-overdrawn. tice notes of higher den)mination are much less 81.-This gives the period recommendlikely toClause be outstanding for aeffect verytolong ations paragraph 145 of: ndthethe Commission's than notes of in lower denomination practice regarding of theasReserve. at the report Bank of Englandthe is constitution to treat all notes not It is considered that in circulation after 4u years. Sub-clause 2.- The Joint Committee introduced the Reserve B-nle might advantage follew that a provision requiring Bill with in the previous the practice of the of years Eneland. after the endBank of ten the amount of gold eecurities in the must never excel Clause 33.- This is Reserve based upon paragraph 144d onegold assets. This has of the half report.of the Thetotal Commissionlecommended that been omitted, a provision is likely totoprove coin and bullionasndsuch securities to be transferred noddy hampering to tie Bank in the Issue Department should be executive specified inofa the Schemanagement the Reserve. The amount ofofnotes in ciicul don at the dule. the time of Sub-clause inauguration of the Bankof will notcoin be and 3.-The amount silver and passed known when now the Bill bullion held is in introduced the Paper Currency Reserve and also between of introduction is 110 crores,the ordates 25 erores more than of thethe amount ti A a a, Bill and its passing into law and the inauguration of the Bank, there will be changes in the constitution of the Reserve held against note issue. It is, therefore, proposed to provide for the transfer to the Bank of assets of such a nature as to enable the Bank to constitute the Reserve in accordance with the requirements laid down in the Act. In order to give the new Bank the necessary margin over minimum requirements, it is proposed to include in the assets transferred, gold and gold securities equal to one-half of the liabilities of the Issue Department as suggested in clause 3(a) of Schedule III to the report. Clause 34. -This gives effect to the recommendation in paragraph 147 of the report regarding the disposal of surplus rupees by the Bank. Clause 35. -This gives effect to the recommenda- tion of the Commission in paragraph 147 of the report. As it would be uneconomical to coin new rupees until the stock of silver rupees in the Reserve is reduced to a limit of 25 crores or one-tenth of the total amount of the Reserve whichever is great- it is proposed to limit the right of the Bank to demand the delivery of rupee coins from Gov- er, ernment. Clause 36.-This gives effect to the recommenda- tion in paragraph 148 of the report regarding the mutual obligations of the Government and the Bank in regard to rupee coin. Clause 37.-This gives effect to the recommendation in paragraph 152 of the report. The provisions regarding mohurs introduced by the Joint Committee in this clause have been omitted. sell gold daring the interim period has been replaced by the immediate permanent obligation to sell gold exchange already mentioned. Clause 40.-This gives effect to the recom- mendation in paragraphs 151 and 166 of the Commission's report, Clause 41.-This gives effect to the recommendation in paragraph 153 of the report regarding the suspensicn of reserve requirements. Clause 42.-This gives effect to the recom- mendation in paragraph 154 of the Commission's report. But it is eow made clear that the Bank is to be exempted only from the payment of stamp duty under the Indian Stamp Act, 1899, in respect of the bank notes issued by it. It is not the intention to give any wider exemption. Clause 43.-The provisions in this clause are in accordance with the recommendations in paragraph 149 of the report. The Commission recommended that the Governor General in Council should have the right to take over the assets of the Issue Department so far as they are required to meet the liability of the note or of rupee redemption. It is proposed to give the Governor General in Council the right to take over the assets not only of the Issue Department but of the Banking Department as well, as in theory such a necessity might arise if the Bank failed to keep sufficient assets in the Issue Department. A provision is also made for the carrying on of the note issue in such circumstances by some other agency determined by the Governor General in Council. the close of the month to which it relates, it is necessary to provide for the receipt of the informatiou mentioned in sub-clause (3.) of this clause. It is also necessary that provision should he Clause 53.-This is based upon the recommendation in paragraph 164 of the report. The Commission proposed that the Governor General in Council should be given absolute power to It is thought preferable that regulations should be made by the Board with the previous approval of the Governor General made to enable the Government to take action not make regulations. Board of the Reserve Bank. in. Council. only on the monthly report, submitted by the Bank, but also on any report received from the The provision in paragraph 161 of the Commission s report, which requires a summary of the monthly return of each bank to be published, has been omitted as the particulars required for the purpose of this clause furnish only a partial Local Boards are not to be constituted on the creation of the Reserve Bank,. but it is proposed to give power to the Reserve Bank Board to establish such Local Boards if considered necessary liter on and to delegate to them such powers and func- statement of the bank's affairs and their publica- tions as may he desirable. financial position of a hank. Clause 45. -This follows the intention of paragraph 87 of the report. Clause 46. -This is based upon the recommendation in paragraph 100 of the Commission's report. Clause 54. -The obligation imposed on the Government b y the Currency Act IV of 1927 to receive sovereigns and half-sovereigns from the public at their bullioti value will be taken over by the Bank simultaneously with the transfer of the conduct of note issue to it. tion might mislead the public as regards the It is considered unnecessary to build up the reserve fund as quickly as the Commission suggest and a lower rate of accumulation has, therefore, Also the additional dividend to be given to shareholders under certain circumbeen proposed. stances has been reiluved from a maximum of 3 per cent. recommended by the Commission to one of 2 per cent. Clause 47.-This gives effect to the recommendation in paragraph 158 of the Commission's report. Clauses 48,49 and 50.-These give effect to the recommendation in paragraph 156 of the report. Clause 51.- This gives effect to the recommendation in paragraph 157 of the report. Clause 52. -It is necessary to make provision for the contingency of the liquidation of the Bank and the distribution of the reserve fund and surplus assets, if any, of the Bank. The First Schedule.-The First Schedule in the Bill as amended by the Joint Committee has been brought up-to-date. The Second Schedule.-The provisions contained in this Schedule involve no fresh charge on the tax-payer. They are designed to compensate the Imperial Bank of India for the agency work done for the Reserve Bank and for the loss in respect of non-paying branches. The Third Schedule.-T his gives the scale of additional dividend payable to the shareholders and is so fixed as to give a maximum of 2 per cent. in addition to the ordinary dividend of 5 per cent. The Fourth Sc4 edule. -T his is based upon Schedule IV to the report of the Commission. The gold coin or bullion held by the Bank in the Issue Department in India is proposed to be shown separately from that held outside India. BASIL P. BLACKEN. The 11th January 1928. a. 41i A r)c) of 6 'SS TEL. NOS. 336. 337 & 338 (KAMI) ' KYOTO. 17E112 VAIKO EQD7raL, KYOTO. ,A0 Kyoto, 4,2 C / 192 442 a,4 fik .0 Art/ r A 174 4/q44.",im- 11 / r,fr. the name of