Book Extract: The Apprentice

A Hundi is a document ordering the payment of money drawn by one person on another. Its main objective was to facilitate transfer of money from one place to another. Hundis were effective instruments that supported long-distance trade. Kachchhis were not the inventors of the hundi. This reputation is traditionally assigned to the Multani hundi bankers from Shikarpur, which is today in Pakistan. Multanis extended their business to Bombay, Madras, Rangoon and Ceylon.

IIn Gujarati tradition, the hundi was the suitable mode of money transfer from Vastupal Tejpal, the banker of Ahmedabad to the Sheth of Junagarh, Narsinh Mehta. Seven details were considered essential for a hundi—the names of the drawer and the drawee, the name of the holder or recipient, the place where the payment would be made, the due date and lastly, the type of hundi. Kachchhis used various types of hundis, which went by the names Namjog hundi, Shahjog hundi and Endhanjog hundi. In all these notes, the duration or time limit within which money was required to be paid was indicated. Tarat hundis were honoured after a day. The Darshani hundi was paid at sight. The Muddati hundi was paid within a stipulated time. The grace period allowed for the Muddati hundi varied by region. A five-day grace period was granted at Bhuj, Mandvi and Mundra, and one or two days at Anjar. In Mandvi, Mundra and Anjar, the hundi was issued or received through brokers. In Bhuj, there were no brokers. Honouring the hundi in all circumstances, including the insolvency of drawer, was key to its success.

A promissory note could be rejected either on its presentation or on the expiry of the term. But if the banker once bound himself on oath to accept a bill, he could not reject it even if the issuer of the bill became insolvent in the interval. If the note was lost, then documents known as penth, per penth or kagar were issued. In all these documents, the information contained in the original hundi was repeated. The notes were sold like any other commodity, by making entries in the seller’s and buyer’s books. In Mandvi, Anjar and Mundra, the bill passed through the hands of brokers whose rates were 1/12 per cent. Apart from regular hundis, there existed the jokhmi (insurer) hundi, where the holder of the hundi undertook the risk of safe transport of goods from one place to another.

Records concerning hundis issued during the 1860s are preserved in the monastery of Dnyangiri Nirmalgiri at Mandvi. These records indicate that hundis were transacted between Muscat, Zanzibar, Bombay and Mandvi. The monasteries acted as banks. Hundis were issued from Mandvi by monasteries and then counterissued in Zanzibar by firms such as those of Jairam Shivji’s and Thariya Topan’s. Monasteries not only maintained Shiva temples and Sanskrit pathashalas, they also operated as business conglomerates. They owned valuable land in Mandvi, Bombay and Karachi. They were funded through donations of the pious, bequests that they got when people died without heirs, business profits, including profits from the opium trade, lease rentals from landholdings, and profits from banking operations.

Kachchhi monasteries seem to have resembled Armenian religious shrines that accumulated capital, leveraging their role as clearing banks for overland trade. The Goswami network, spread across Mandvi, Bombay, Karachi, Muscat, Zanzibar and east Africa, resembled that of the Chettiars who were famous for their widespread operations in Burma, Ceylon and Malaya.

A Kachchhi businessman had three options for obtaining credit. A loan from relatives or from firms known to them could be convenient, but the amounts would necessarily be limited. A loan from a substantial merchant was the second option. The third potential source were the monasteries of the Goswamis who had access to a wide network. The Goswamis were true bankers, not just moneylenders. They accepted deposits as well as made loans. There were a total of forty monasteries or maths, as they were known in Mandvi. The monasteries acted as banks. Hundis were issued from Mandvi by monasteries and then counterissued in Zanzibar by firms such as those of Jairam Shivji’s and Thariya Topan’s. Monasteries not only maintained Shiva temples and Sanskrit pathashalas, they also operated as business conglomerates. They owned valuable land in Mandvi, Bombay and Karachi. They were funded through donations of the pious, bequests that they got when people died without heirs, business profits, including profits from the opium trade, lease rentals from landholdings, and profits from banking operations.

Kachchhi monasteries seem to have resembled Armenian religious shrines that accumulated capital, leveraging their role as clearing banks for overland trade. The Goswami network, spread across Mandvi, Bombay, Karachi, Muscat, Zanzibar and east Africa, resembled that of the Chettiars who were famous for their widespread operations in Burma, Ceylon and Malaya.

A Kachchhi businessman had three options for obtaining credit. A loan from relatives or from firms known to them could be convenient, but the amounts would necessarily be limited. A loan from a substantial merchant was the second option. The third potential source were the monasteries of the Goswamis who had access to a wide network. The Goswamis were true bankers, not just moneylenders. They accepted deposits as well as made loans. There were a total of forty monasteries or maths, as they were known in Kachchh. By tradition, the Dnyanagar Nirmalgar math was considered the chief or head math. This math acted as the central bank and clearing house for other maths and indeed for Kachchh itself. The heads or mahants of the different Goswami maths were selected by an informal but very effective process of mutual consent. The mahants could not be hereditary as all Goswami monks were required to be bachelors. The maths also provided safety deposit services for clients who needed to store their gold, silver, and other valuables.

Secret store rooms in the building of the main math in Mandvi are a testimony to this aspect of their business. ... The Goswamis had considerable political clout. Their services were frequently sought by the durbar. Riddhgar Goswami was known to have been personally welcome at the royal court at all times. The tradition of the Goswami banker monks is so unique to Kachchh that their existence perhaps answers Claude Markovits’ question asking after the secret behind the magical success of Kachchhis overseas.

The Language of Business
Kachchhi entrepreneurs had a love affair with accounting. According to one Kachchhi tradition, the account book is compared to a mirror that reflects the financial façade of a merchant. It could also be a talisman that saves merchants from making losses. It was therefore perilous to ignore the account book.

Double entry bookkeeping and difficult compound interest formulas were completely internalized by Kachchhi businessmen. The daybook called rojmel was the fundamental financial record for a business. This carefully recorded financial transactions at the time that they occurred. The bookkeeper’s next device, the journal known as avro, was the bridge between the daybook and the ledger. On a monthly basis, the bookkeeper copied the financial information from the daybook into the journal. The journal included a bill register called hundini nondh. The goal of the journal was to organize transactions by customer and by date in order to facilitate the creation of the ledger. The ledger or khatavahi contained a summary of all entries made in the avro. Details of transactions with a client were carefully entered in the ledger. The ledger was many a time treated as evidence for future claims or settlement.

Kachchhis believed in planning and forecasting future profits. This task was assigned to experienced accountants. Cash was king for all Kachchhi merchants, and cash was meticulously tracked in a cashbook referred to as rokadvahi. For other items, a notebook known as hathavahi was maintained. Some bankers kept separate books for principal amounts and for interest, called vijavahi. The bill register, known as jangadvahi, showed all bills of exchange issued and discharged.

In Gujarati, accounts was known as namu and the accountant as Mehtaji. The account books and other financial documents of firms such as those of Ratansi Purshottam’s make for fascinating reading. An interesting feature of Kachchhi letterheads was their professional ‘logo’ which was carried prominently: traders printed weighing scales, swords or tridents, potters’ wheels and seafarers anchors for logos. Another fascinating aspect of Kachchhi legal documents was that the name of the first witness to the execution was always the sun i.e. Shree Suraj ni Sankh. This custom transcended religious differences. The tradition of Kachchh was that documents and agreements were prepared and signed during the day in the presence of the sun. For this reason, during the monsoon, when the sun was rarely visible, matters that required documentation were avoided!

From Apprentice to Merchant
The apprenticeship system was the bedrock of the education and training of Kachchhi merchants. The Kachchhi love for numbers is illustrated by the frequent references to gantar or numeracy skills as being more valuable for survival and progress than bhantar or formal book-learning. For Kachchhis, the bazaar was the best school. Sampat describes the apprenticeship period set for a Kachchhi boy to turn him from a novice into a seasoned businessperson. When a boy was around fifteen years of age, he was sent to a firm i.e. pedhi to start his business lessons. Like apprentices the world over, he was first put to work cleaning the shop, lighting the diya (lamp), buying groceries and so on. At the next stage, he was taught accounting; he learned to keep the books of account and draw up rudimentary balance sheets. He then moved on to learn how to scrutinize the quality of products and commodities, where to warehouse different articles and how to keep track of expenses. In a span of ten years, almost all details pertaining to the pedhi were learnt. Travellers like Ruschenberger have attested to the fact that far from Mandvi, in distant places like Muscat and Zanzibar, the Kachchhi system of apprenticeship flourished. Bartle Frere’s observation at Zanzibar captures the graduation of the apprentice: Arriving at his future scene of business with little beyond credentials of his fellow caste men, after perhaps a brief apprenticeship in some older firms, he starts a shop of his own with goods advanced on credit by some large house and after a few years, when he has made a little money, generally returns home to marry to make fresh business and then comes back to Africa to repeat, on a large scale. Many firms had residential quarters; the apprentice literally spent day and night at the firm. Living without parental support, many apprentices learnt to make multiple adjustments. Apprenticeship was a great leveller. A few apprentices were orphans or had a single parent; many came from a poor background.

In contrast, some of the others were wealthy, and some even future heirs of the firm. There was little distinction in the early stages in the training of this diverse group. Laddha Damji, who controlled the big business concern of Jairam Shivji’s at Zanzibar, came from a poor family headed by a single parent. He went through the standard apprenticeship module, starting with cooking, dusting and cleaning. It is said that he rose up the ranks partly by watching closely the conclusion of trade deals, and partly by virtue of his good handwriting and accountancy skills. In just a few years, he rose to the top of the firm. Caste and religion were not barriers for clever, hardworking apprentices.

This book is the 8th volume in the Story of Indian Business series, edited by Gurcharan Das. With permission from Penguin Books India