Posted on: 16 January 2012

HUNDI (Indian bill of exchange)
Bombay, India, late 19th century AD

A note with a special, coded message

A bill of exchange is a written note given by one person to another, instructing a third person to pay whoever presents it to them a sum of money. The Indian name for a bill of exchange is a hundi. This one contains a request by a Bombay merchant for the payment of 300 rupees, and bears a revenue stamp of Queen Victoria (empress of India 1876-1901) for one anna (1/16th of a rupee).

Bills of exchange appear to have been in use in India from at least the sixteenth century. Banarasi Das, an Indian merchant born in 1586, records that his father gave him a hundi for 200 rupees to enable him to borrow money in another city and start trading there. As a safety precaution, the bills were usually written in an elaborate script which only bankers knew how to read and write. Like the bill of exchange in European banking, the hundi is still used in India today, even though the resources of modern banking are available for most commercial transactions.

C. R. Bruce, J. S. Deyall, N. Rhodes and W. F. Spengler, The Standard guide to South As (Iolo Wisconsin, Krause Publications, 1991)

J. Williams (ed.), Money: a history (London, The British Museum Press, 1997)

Source: British Museum, London


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Thanx a ton ...I am a lawyer & I have read all about Hundis ...this is the first time I am actually seeing one....its sad that we do not use India promissory note nowadays

Banks still have a jargon that commoners struggle to decode ! :)

The Forefather of Hawala

its earlier than that...the hundis are in use since the 13th century...

These are still in used in Calcutta! I remember in my younger days a lot of inter corporate borrowings was done with Hundis.

Sushil Talwar Hundis are prevalent all over India still, but the Marwari community of Calcutta operate hundis without the banking operations.

Maitree Sabnis : Hundis were first introduced in India during the Mauryan empire of around 300 BC

Of course Arindam that is true and almost zero default rate. The only default that comes to mind is when Dunlop defaulted after the Chhabria take over.

Hundis essentially are promissory notes. A promissory note is a promise made by a person to pay a certain sum of money to the person within named on a certain date and at a certain place. If the promise is considered good, the beneficiary of a hundi can raise money from a third person on the strength of that promise or simply sell (by endorsement) that paper to a third party who on the due date could collect payment from the promiser. This was an effective way of transfering money from one place to another (just as a hawala referd to above by Mr. Roy Daniels. The Banking Regulation Act in India restricted all kinds of personal banking activities to only the registered banks and put individual bankers (including usorious money lenders) out of business. The Peshwas are known to have signed hundis to raise money for the battle of Panipat.

To take the connection of Battle of Panipat and Hundis further.Nanasheb Peshwa was camping at Sironj and was desperate to get some news from Panipat as all the communication with Bhau had broken down because of Abdali .So on 24th January Peshwa got first inkling of bad news .A dispatch rider of a money lender going from Panipat to Aurangabad was bought to the peshwa's presence.His bag was opened and a cryptic message was read out Its originally in Marathi"दोन मोती गल्लत,सत्तावीस अश्रफात आणि खुर्दा कितीचा उडाला याची गणतीच नाही".Rough English translation would be"two pearls have been disolved twenty seven gold mohors have been lost and loss of siver and copper coins cannot be calculated".

Thank you Mr Shekhar Sathe. Hawala and Hundi are almost money transfer synonyms. "Informal value transfer systems based on the performance and honor of a huge network of money brokers", The ancient Chinese had their own fei qian or flying money. India's great experience with the hundi allowed it to perfect hawala, bewildering for tax officials and the police worldwide. The Mutani Hundi was particularly well known.