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Usury in Medieval India Author(s): Irfan Habib Source: Comparative Studies in Society and History, Vol. 6, No. 4 (Jul.

, 1964), pp. 393-419 Published by: Cambridge University Press Stable URL: http://www.jstor.org/stable/177929 Accessed: 18/04/2009 02:57
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USURY IN MEDIEVAL INDIA

By convention the medieval period of Indian history is supposed to begin either with the death of Harsha, c. 648, or, as in this study, with the Turkish conquest of Northern India (about the beginning of the 13th century), and to end on the eve of the British conquests (about the middle of the 18th century). Although this sets a very late date for the close of the Indian medieval period, the arrangement is not illogical, since it was only with the British conquests that India became subject to the modern capitalistic system. But if we can say with certainty that the society of the period previous to British rule was not capitalistic, it is yet not a simple matter to define its basic elements. It is no longer possible to accept the assumption that its economy was based primarily on production for use, and not exchange, and that commodity production and money economy are entirely a gift of British rule. There are in fact strong grounds for supposing that the cash nexus was established in the central parts of the Dehli Empire as early as the beginning of the 14th century; 1 and there is overwhelming evidence at hand to suggest that over large parts of the Mughal Empire (16th and 17th centuries), the land-revenue, which comprised the bulk of the peasant's surplus produce, was collected in money and not in kind.2 From such wide use of money, we should naturally infer the prevalence of money-lending and credit on a large scale. The chief object of the present study is to test this inference by examining the actual evidence from the period relating to usury. The term "usury" has been employed here in the same sense as is sanctioned by usage in writings on medieval European history, namely, lending at interest, whatever the rate or the form of extracting it. We propose to examine the extent of usury, and the various forms in which it was practised, in the different sectors of medieval Indian economy, as well as the ways in which different classes of medieval Indian society were affected by it. It should, however, be confessed at the outset that our information does not come uniformly from the entire period, but comes in the larger measure from the 17th century alone. Moreover, it is full on only some aspects of the subject while being fragmentary or even non-existent on others.
1 Cf. W. H. Moreland, The Agrarian System of Moslem India (Allahabad reprint of 1929 ed., n.d.), pp. 11, 114, 136-7. 2 See my Agrarian System of Mughal India (Bombay, 1963), pp. 236-39.

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IRFAN HABIB

Agricultural and Rural Usury

Of key importancein any assessmentof the general prevalenceof usury would be a knowledgeof the extent of its penetration the agrarianeconof but such as it is, it does On this the evidence is undoubtedly limited, omy. was suggestforcefullythat peasantindebtedness not by any meansunknown. A work on land-revenue writtenin Bengal just before the administration, British conquest,notes that the peasantsfell into debt "mostly"because of the need to pay the land-revenue to meet the additionaltax-levies, and or in order to replace draughtcattle, to observe the rites of "occasionally" or marriageand bereavement, to meet the expensesincurredin prosecuting was the principalcause disputesamong themselves.sThat the land-revenue of the peasant'sfalling into debt, can be readily understoodseeing that it generally amountedto a third or half of the total produce of the land.4 Moreover,it was not only in lean years that the peasantmight find himself withoutresourcesto pay the revenue:It appearsthat, in the 17th centuryat least,paymentof revenuewas occasionallydemandedeven before theharvest could be collected.5A specimendocumentpreservedin a late 17th century text-bookon accountancy showshow an entirevillage-community peasants of This document, might have to borrowmoney in order to pay land-revenue. which is a summarystatementof the financesof a villagefor the year 169697, shows that from the amount collected in rates levied upon individual peasants,a sum of Rs 160, annas 9, was paid into the treasurytowardsthe for land-revenue the year, and about half as much (Rs 80) was set aside for of loan from the mahajan(professionalmoney-lender)".6 Ob"repayment viously,the loan from the mahajanhad been taken up by the villagein some demandfor that year. This is a case previousyear to meet the land-revenue of collectiveindebtedness,but it is certainthat individualpeasantsalso fell into debt; and many of them owed everything they had to the money-lender. Thus a farman (imperialorder) issued by Aurangzeb(1659-1707) a little before 1684, had to providefor the exemptionfrom the poll-taxof "thepoor peasants(reza ri'aya),who engage in cultivation,but are wholly in debt for their seeds and cattle".7
4 For the magnitude of the land-revenue demand in the 16th and 17th centuries, see my Agrarian System of Mughal India, pp. 190-96. During the 14th century, 'Alauddin Khalji (1296-1316) is said to have taken half of the produce as revenue (Zia'u-d Din Barani, Tarlikh-i Firiz-shdh7, Bib. Ind. ed., p. 287). 5 My Agrarian System of Mughal India, pp. 241-2. 6 Nandram, Siyaqnama (Lucknow, 1879), pp. 77-79. This work was written in the Ilhabad (Allahabad) province and, therefore, probably represents the conditions there, although its documents purport to come from a fictitious district in Kashmir. The Rupee in Mughal times was of practically pure silver, and weighed 178 or 180 grains. 16 annas made a Rupee. 7 The farmdn is reproducedby "Malikzada"in Nigirnama-i Munshi (Lucknow, 1884),

3 Anonymous, Risala-i Ziridat (c. 1750), MS EdinburghNo. 144, f. lOb.

USURY IN MEDIEVAL INDIA

395

The burdenthat usuryimposedon the peasantcould not have been light; in and Aurangzeb his farmanwas probablycorrectin equatingthe degreeof The 18th century a peasant'sindebtednesswith that of his pauperisation. work from Bengal, which we have quoted above, says that sanyiiss (mendicants) and Baksariyas(infantrysoldiers and "clubmenof zamindirs")8 usually engaged in money-lending(mahajan) in the Bengal villages; and that they lent nominallyat 11/2 annas in the Rupee (1 Rupee - 16 annas) per month, but actually,by certaindevices, obtaineda gain of 2 annas per month, i.e. 150% per annum at the simple rate. The loan was usually advancedfor a period of two or three months;and if not repaidwithinit, the interestdue was addedto the principal,and a fresh bond extractedfrom the borrower. "Thus,constantlytakingcompoundinterest", says our work, "they (the usurers)bring about the ruin of the peasantry"." Besides simple money-lending other forms of usury also prevailedin the forms in which credit appearedin close associationwith commerce. villages, Sometimes,it is said, the loan was given in cash, but repaymentdemanded in kind;and the usurercould then enhancehis gainby fixingthe rate of commutationand under-weighing corn received.'0This statementrelates to the but the practiceseems to have prevailedextensivelyin Bengal, 18th-century the Agra region duringthe 17th century.Here indigo merchantsadvanced in money to the peasantsand took repayment indigo,fixing the rate beforehand. This, in 1614, was reportedto be "a custom and the cheapestcourse of buying"; and, to judge from one recordedinstance, the differencebe" tweenthe contractrateandthe marketpricecouldbe quitesubstantial.12 From comes evidenceof a still more complexform of usury. Gujarat 17th-century Here we are told of brokersof Surat,"who drive the same trade of giveing out old worme eaten decayed corne in the severall neighbouring villadges; which they take out in (cotton)yarne".l3 This practicewould have provided the creditorwith double means of makinghis gain, by inflatingthe rate of
p. 139, a collection of documents compiled in 1684. The jiziya, or poll-tax on nonMuslims, from which the farmin grants exemption, was imposed in 1679. 8 Cf. William Irvine, The Army of the Indian Moghuls (New Delhi, 1961), p. 168. 9 Risala-i Ziraiat, MS Edinburgh 144, ff. lOb.-lla. 10 Ibid., f. lla. A slightly later work, Yasin's Glossary of Revenue Terms, written in the later half of the 18th century and based on the author's experience of Dehli and Bengal, defines a practice called bai -i salam as follows: "The grain has not yet appeared in the field, but a man purchases it, and then seizes the grain when it appears"(Br. Mus. Add. 6603, f. 50a). 11 Letters Received by the East India Company from its Servants in the East, ed. W. Foster, II, p. 106. Cf. Pelsaert, 'Remonstrantie',tr. Moreland and Geyl, Jahangir'sIndia (Cambridge, 1925), p. 16. 12 In 1627, the English East India Company bought Biana indigo at Rs 35 to 361/2 per maund, except for 'a small parcel bought green in the villages "by mony advanced beforehand", which cost only 241/2 rupees' (The English Factories in India, 1625-29, ed. Foster, p. 208). 13 English Factories, 1661-65, p. 112.

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IRFAN HABIB

corn advanced to the villagers as well as underrating the yarn brought by them in repayment. The need of the peasant for resources and the evidently high cost of borrowing money from private sources led the medieval State to offer credit to the cultivators from its own resources. It is not surprising that the State should have begun to assume this role in the first half of the 14th century. Under 'Ala u-d Din Khalji (1296-1316) the claim of the State to deal directly with the peasants and to take nearly the whole of the surplus produce was for the first time asserted. The State thereby not only drew an immense income so as to command enormous monetary resources, but its revenues also began to vary in close association with the fortunes of cultivation. Until the reign of Muhammad Tughluq (1325-51), the advancing of loans to peasants in order to encourage cultivation does not seem to have formed part of the But during a famine in the first decade agrarian policy of the administration.14 of his reign, Muhammad Tughluq ordered the digging of wells and gave money and seeds to peasants around Dehli to help them undertake cultivation, demanding in return a part of the produce for the State granaries. This was apparently regarded as an innovation, because a Muslim theologian condemned it presumably on suspicion of usurious gain accruing to the State from the transaction.15 However, the Sultan showed his faith in the new practice not only by executing the hapless scholar, but also by undertaking a far more ambitious project on the same lines a few years later. His object now was to extend cultivation and improve cropping in the Dehli-Doab region. For this purpose he set up a whole body of officials, who were to realise the desired object mainly through advancing loans (termed sondhar) to the peasants. According to one contemporary historian nearly 7 million tankas (coins of practically pure silver, each weighing nearly 173 grains) were disbursed by the royal treasury to be given out in such loans; but another, slightly later, historian puts the figure at 20 million tankas.16 What was an innovation in the 14th century became under the Mughals (16th and 17th centuries) a familiar, almost routine, administrative practice. It was laid down in practically all regulations and instructions issued to
Barani mentions this practice neither in his account of CAlau-dDin Khalji's radical agrarianmeasures nor in his passage on Ghiyasu-d Din Tughluq's views on land-revenue administration.The sole means of encouraging cultivation that the latter Sultan is said to have recommended was moderation in enhancing the land-revenue. (Tafrikh-iFTirzshahl, Bib. Ind., pp. 287-91, 429-31). 15 The Rehla of Ibn Battuta, tr. Mahdi Husain (Baroda), pp. 88-9. 16 Barani, Ta'rkh-i Firiz-shahl, pp. 498-9; Shams Siraj 'Afif, TaOrikh-i Firiz-shahL, Bib. Ind., p. 91. The term sondhdr was indigenous. It has continued in use in the same region in the sense of money on advance 'given to ploughmen when first engaged" (H. M. Elliot, Memoirs on History, Folklore & Distribution of the Races of the NorthWesternProvinces of India, ed. Beames, London, 1869, II, p. 345). For the tanka, see H. N. Wright, The Coinage & Metrology of the Sultans of Delhi (Delhi, 1936), especially, pp. 391-402.
14

USURY IN MEDIEVAL INDIA

397

revenueofficialsthat they oughtto advanceloans, calledtaqdvi(lit. "strengthof usage), out of the treasuryto the giving";"taccavi" modernAnglo-Indian to enable them to buy seeds and cattle. The loans were generally peasants local officialswho advancedthroughthe villageheadmenand otherhereditary stood surety for repaymentby the individualcultivators.The loans were eitherat the time of harvestin two instalments, generallydue for repayment in records or at the firsttwo harvests.Thereis no reference the Mughal-period to interestbeingcharged,thoughit is possiblethatthe local officialstook their from the peasants,particularly when they stood surety.17 own commissions It seems that such officials also advancedloans to the peasants out of their own resources;and these too bore the name of taqav.8l On such loans the borrowerswere presumablymade to pay interest; and a referenceto intereston taqdvimade in Yasin's Glossary(latterhalf of the 18th century) probablyapplies to these loans. Whenever,accordingto the Glossary,the peasantsobtainedtaqdvi,they paid two annasin the Rupee (or l/sth of the and (munafac) month,or for each harvest?); when(per principal)as "profit" ever they borrowedfor plantingsugar-cane, they paid Rs 2 per bigha (measure of area, of varyingsizes) of the field planted.'9 Medievalruralsociety contained,besides the peasants,a superiorclass to which contemporary terminologyfrom the 16th centuryonwardsgave the held rights of various types over land and name zcamndar. The zamnnddrs its produce,often compounded(nominallyat least) at a particularshare of the produce,or of the land-revenue. They were usuallycalled upon to collect due on the lands over which they had such rights. and pay the land-revenue This obligation,apartfrom other factors, also placed them underthe necessity of havingrecourseto the usurer,wheneverthey either could not collect the land-revenueor had spent what they had collected. Jauhar recordsin his memoirsthat when in 1554 he was appointedRevenue-collector Patti of in the Panjab,he was distressed find on reachingthe place that to Haibatpur "the Afghanshave borrowedlarge sums from the baqqals(grain-merchants; also membersof the well-knownIndiancommercialcaste of Banyas)to pay the land-revenue, pledgingwith them the wives and childrenof their servants
17 The 16th-and 17th-century documents on which the statements in this paragraph are based, are too numerous to be cited in full; a selection follows. Todar Mal's Memorandum, Akbar's 27th regnal year, original version in an early draft of Akbarnama, MS British Mus. Add. 27,247, f. 331b; Abu-l Fazl, Ain-i Akbar?, ed. MS Blochmann, Bib. Ind., I, p. 285; Adab-i CAlamgirT, British Mus. Or. 173, f. 123b; Sadiq Khan, History of Shhahiahn'sReign, MS Brit. Mus. Or. 174, f. 185a; Farhang-i Kardani, MS Aligarh: Abdus Salam F.85/315, f. 35b. For a detailed treatment of the subject, see my Agrarian System of Mughal India, pp. 253-55. 18 For taqadvadvanced to peasants by chaudhuris (chief local officials of a pargana), see Public Record Office, Allahabad, Ist Series, Doc. No. 424 (A.D. 1665) and Durru-l 'Ulim (A.D. 1688-9), MS Bodleian, Walker 104, f. 43a; and for the same by muqaddams (village headmen), see Durru-l cUlfim, f. 55a-b. 19 MS Brit. Mus. Add. 6603, f. 54a.

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IRFAN HABIB

(zah-o-zad-i mawali), so that [since the Afghans had fled] there is no way for the latter to obtain their release". Jauhar thereupon seized all the granaries of the Afghans, sold the corn and paid off the baqqals to secure the pledges' freedom.20 Similarly, in mid-18th century Bengal, there were mahajans who "offer to pay the land-revenue on behalf of the zam7ndar. Till their time (of final accounting) comes, they obtain great profit from the perquisites of revenue-farming, interest, commission, etc." Such mahajans were in fact often ambitious of becoming zamindars themselves, taking over the zamindarls of their debtors when the latter failed to repay their debts.21 In normal circumstances, the mahijan's presence, enabling the zamindar to obtain money whenever the need arose, must have been quite welcome to the latter. A case on record suggests that considerable intimacy could spring up between the two. A Muslim trooper or officer from the Panjab, serving in the Mughal expeditionary army in Rajasthan in 1680, heard that the mahajans of his village, of which he and his brothers were obviously the zamindars, had been attacked and plundered by the zamdndars of three neighbouring villages. He forthwith went to his commander to express his great anxiety about their protection, declaring that "the mahajans of that place, except for their faith and religion [the mahajans being presumably Hindus] are one with us and are like brothers and relatives to us".22Similarly, we find the holder of a land-revenue grant greatly interested in getting back to his village certain mahajans whom neighbouring zamdndars had driven away: On his petition the emperor, Shahjahan, issued a farman (A.D. 1653), directing his officers to reassure and resettle the mahajans.23 Commercial Usury It thus seems that usury had deeply penetrated rural life, the penetration being impelled by the large magnitude of the land-revenue demand and the growth of the cash nexus. The enormous revenues of the ruling class and the drainage of a large part of the agricultural produce to the towns through the channels of commerce also helped to create and maintain a large non-agricultural population consisting of various classes such as artisans and labourers, petty traders and merchants, and the nobility and its hangers-on. Naturally, they were far more immersed in pure monetary relationships than the rural population.
Mihtar Jauhar, Tazkiratu-l Waqicat,MS British Mus., Add. 16, 711, f. 132a-b. Risala-i Zirdat, MS EdinburghNo. 144, f. lOb. 22 Waqiiic-i Ajmer (official intelligencer's reports to the Court from Ajmer, &c.), Jumada I, 23rd regnal year of Aurangzeb (Aligarh transcript, p. 555). The village was called Aurangpir Badal. The name of the trooper's father was Badal, so that it may be assumed that the father had settled the village in the reign of Aurangzeb. 23 For the text of the farmdn see Proceedings the IndianHistorical Records Comof
21

20

mission(1942),pp. 56-7.

USURY IN MEDIEVAL INDIA

399

The story is told in a 17th-centurywork of how the famous religious teacher,Kabir, a weaverof Banaras,findingnothingin his hovel to feed his guests, sent his wife to the shop of a baqqalto beg for rice and ghi (Indian to Of butter)on credit,submitting whatevertermsthe baqqdlimposed.24 this of sheerpovertyany furtherexamplesare directresortto the usurerbecause not available;but this is, perhaps,only becausewe have so little information very often relatingto the social life of the commonartisan.That he depended on credit for his subsistenceis shown by his readinessto accept terms unfavourableto himself from anyone who gave him a part of the price of his wares in advance.The Englishin the 17th centuryfound, and followed,the in to practiceof giving money beforehand weaversalmosteverywhere India; at Surat,for example,as well as in Sind, the Dehli region,Bengal and GolIn kunda.25 Bengal a technicalterm seems to have developedfor such advances made to artisans,namely, dadani, from the Persianword dadan, to give.26 From referencesin Englishfactory recordsit is possible to determinethe customaryterms on which these advanceswere made. When a weaver accepted money in advance,he committedhimselfto give priorityto the work orderedby the lender and to deliverhis cloth within the stipulatedperiod.27 No interestappearsto have been charged,providedthe work was completed by the due date. This did not preventcertainother impositionsbeing levied on the artisan:The weaversat Suratworkingfor the Englishwere forced to pay 12% of the advances received by them to the broker who acted as middle-man.The prices of the finishedproductstoo were fixed beforehand, so that it may be assumed that the weavers, or artisans,usually received The advancesmight be made in cash,29 in or less than the marketprice.28
24
25

English Factories, 1661-64, pp. 111-2, 208-9 (Surat); ibid., 1637-41, p. 137, & 1646-50, p. 159 (Sind); 1624-29, p. 149 (Samana, Dehli province); 1655-60, p. 296 & 1661-64, p. 62 (Bengal); and 1637-41, pp. 68-9 (Golkunda). 26 Hobson-Jobson, s.v. DADNY (p. 290). All the instances of the use of this word cited here come from Bengal. 27 English Factories, 1661-64, pp. 112, 208-9. A complaint is recorded from 1647 that the weavers at Nasrpur in Sind were "a company of base rogues, for, notwithstanding wee give them mony aforehand (?) part of the yeare, and that in the time of there greatest want, yet if any pedling cloth merchant comes to buy, they leave us and work for him" (ibid., 1646-50, p. 159). For the period being stipulated, see Totle's report from Samana in 1626, saying that he "has distributedsome 4,000 rupees to the weavers, who will bring in their goods within ten days" (ibid., 1624-29, p. 149). 28 The last three sentences are based on a long passage in the English Factories, 1661-64, pp. 111-2, setting out a detailed exposure of the irregularitiescommitted by the broker Somaji in the management of the loans advanced to the weavers on behalf of the English. The only reference to interest is to the one charged by the broker from the English whenever he himself provided the money for disbursement among weavers. When accepting the advances, the weavers bound themselves to supply the specified pieces at 5 % mahmudis (local coins of alloyed silver), while the broker took from the English 6 14 mahmudis per piece. 29 Cf. Hobson-Jobson, p. 290, for quotation from Hedges, Diary, October 2, 1683,

Dabistan-i Mazahib (Bombay), pp. 159-60.

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IRFAN HABIB

kind. At Suratit was found that the weaverswere paid not "in Money (i.e. silvermoney),but in leiw thereofin old wormeeaten decayedcome and pice (whichis a coppercoyne...)"; and these were probablyover-ratedat that.30 The Englishin Bengal experimented with anotherstep, more in line with the classic "putting-out" when they suppliedthe weaversnot with money system, but with raw material,i.e. wound silk.38 The petty traderappearsto have been no less dependenton the merchant than the artisan.A numberof verses of the popularreligious money-lender teachersof the 15th and 16th centuries,preservedin the Sikh scripture, the Gura GranthSahib, shed an interesting betweenthe light on the relationship lending merchant,the sah or sahu, and the traders, banjdras,bdpdrisor biiparis. It seems to have been usual for the saihi to make a loan to the traderto carry stock to other places, the principaland intereston the loan being repaidout of the goods that the traderbroughtback. Thus Kabir (c. to 1520) in one of his verses expresseshis unwillingness take up the work of the grain-carrier (banjara),because in that "the stock (mil) diminishes, while the interest (biaj) increases, constantly".32 Nanak asks the trader (banjara,i.e., man) to buy such goods only as would be approvedby the sihu (God) beyond.33 discriminating Arjan speaks of God as the greatsahu, in a palace and served by his millions of banjaras,and one whose dwelling confidence it is not easy for new bapar7sto gain.34Elsewhere, the same teacher comparesthe relationshipof the Guru, or spiritualGuide, and his sikhs (disciples)to that of the sahu and his banjaras,except that the capital It (punfi) in the former case consists of God's name, not money.35 may be markedthat the petty trader'ssubjection the usurermust have been almost to to absolute,if it could thus be comparedto man's subservience God or to the disciples'to the Gura. Such authority the hands of the usurerwould seem to imply that it was in difficult for the petty trader to obtain capital for financing his extremely was trade;and a completesubordination requiredfrom him before he could have his stock. But at higherlevels in the commercial world merchants had
referring to the payment of "dadny" (dadanl) in sikka or newly coined rupees, at Qasimbazar. 30 English Factories, 1661-64, p. 112. 31 The reason given for the step was that "being poore men", the weavers purchased silk of bad quality and thus "those that trusted them (with money) were forc't to receave any taffetyes never so badd". (English Factories, 1655-60, p. 296). 32 Guri Granth Sahib, Devanagari text, published by the Gurudwara Prabandhak Committee (Amritsar, 1951), pp. 1194-5. The term banjara was generally applied, as in these verses of Kabir, to a wandering community of traders who transportedgrain, sugar, salt and other goods of bulk. In the verses of Nanak and Arjan, however, the word is apparentlyused for any trader and thus treated as a synonym of bapiir. 33 Ibid., I, p. 22. 34 Ibid., I, pp. 180-81. 35 Ibid., I, p. 430.

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401

access to the services of a large money market where lending was purely for the sake of interest and did not involve any control over the operations of the borrower. One index of the existence of such a money market is provided by the wide use of the "indigenous" bills of exchange. The hundi or hundw7 was a bill promising payment at a particular place after a specified period, usually of two months or less. It was fully saleable so that a merchant or anyone else who had cash on hand for a short time, could invest it by discounting hundis. So brisk had the sales of hundis become that, according to a mid-18th century historian of Gujarat, commercial payments were generally made in these bills and only seldom in cash. Professional bankers, known as sarrafs, specialised in dealing in hundis, by which means they financed commerce to a considerable extent. The discount charged on the bills covered not only interest, but also the cost of insurance and of the transmission of money. It is, therefore, difficult to work out from the discount, or "exchange", the rates of interest paid on short-term commercial loans.36 Issuing hundis was, however, only one of the ways by which merchants borrowed money. Thanks to the published English records we are in possession of extensive information about how money was raised by merchants and the rates of interest which prevailed in Indian commercial centres during the 17th century. When the English first came to India, they were evidently not greatly trusted in the Indian markets. In 1617 we find the Surat factors rejecting a suggestion that as much as Rs 40,000 could be raised by them in India or anything obtained at a rate lower than 3 % per month. For this they gave as reasons, not their own lack of credit, but the poverty of the people, who "have not money to lay out", and the fear entertained by the people of tyrants who might seize their money if they knew they had some to lend.37 But with the passage of time the credit of the English rose, and they were able to borrow large amounts at rates far below 3%. Their subsequent records contain a considerable amount of information on their own transactions and on the rates generally prevalent, which completely refutes the earlier reports of the factors. The following tables set out part of this information, which is taken entirely from the volumes of the English Factories in India.38
For a detailed treatmentof the subject of this paragraph,see my article on "Banking in Mughal India", in Contributionsto Indian Economic History, I, ed. Tapan Raychaudhuri (Calcutta, 1960), pp. 8-14. The reference to the use of huni7lsin commercial payments is in 'Ali Muhammad Khan, Mir?at-iAhmadi, ed. Nawab Ali (Baroda), I, pp. 410-11. 37 Letters Received, V, pp. 86-7. 38 I should thank my friend and colleague, Mr. A. J. Qaisar, for drawing my attention to a number of references given in these tables.
36

402

IRFAN HABIB SURAT

Year 1624
1634

Amount borrowed -

Rate of interest per month 1%


1/8%

Remarks and References 'Usual "bezar"(market)rate'. F. 1622-23, 178.


Interest added to certain accounts in English

1635 1642 1650

Rs 20,000

1% 1 or 11/4% 1%

L 20,000 (nearly Rs 180,000)39 1651 L 20,000

books. F. 1634-36, 35. Letter of credit obtained by factors. F. 163436, 114. Rates at which factors believed able to borrow. F. 1642-45, 33. Amount the English could raise; lower rate not possible. F. 1646-50, 316. Amount the Company authorisedSurat factors borrow. Rate (quoted as 6% p.a.) believed "usual between Banians" (belief contested by factors). F. 1651-54, 86.
Lowest rate prevailing. F. 1651-54, 86. Rate (quoted as 6% p.a.) at which factors

/2 %

*|,~~~~ ~~to
3/4%

1652 1652

/2%

1652 Rs 200,000
1654 265,824

%%
1/2 & 5/%

hoped to borrow. F. 1651-54, 109-10. Loan raised by factors. F. 1651-54, 119.


Current English debt, part at one rate, rest at

mahmidis (over Rs 100,000) 1657


1659 -

the other. F. 1651-54, 222. %%


% & /2 %
34

Borrowing expected to be possible at this rate,


quoted as 7 /2% p.a. F. 165 5-60, 144-5. English able to borrow at these rates (quoted as 71/2 & 9% p.a.) only. F. 1655-60, 158.

1659
1659

63,000 mahmidis
-

Private Englishman'sdebt. Rate quoted as 9% p.a. F. 1655-60, 196.


Sarrafs said to be willing to pay this rate (quoted as 7/2% p.a.) on deposits by English.

/8 %

1665
1665

3 %
/2 %

F. 1655-60, 199. "Common interest" paid by merchants. F. 1665-67, 5.


Rate expected on Company's loan to "mer-

chants of a cleare reputation". F. 1665-67, 196.

It will be seen from these tables that, except for certain rates quoted for the year (apparently the convenienceof the Englishthemselves), rates for the of interestare usuallyquotedfor the month.There can hardlybe any doubt that this was the generalpracticethroughout medievalperiod.40 the Fixation of interestin monthly rates seems to suggest that loans were generallyad39 Here and elsewhere amounts given in Pounds sterling are converted into Rupees at the rate of 2s. 3d., which seems to have been accepted by the English Company at the time (e.g., English Factories, 1642-45, p. 209). 40 The 14th-centurypoet Amir Khusrau of Dehli, referring to a usurer, speaks of his constant impatience to see the month pass to that he might claim his interest (Matla'u-l Anwar, A.D. 1298-9, Aligarh, 1926, p. 174).

USURY MEDIEVAL IN INDIA AHMADABAD Amount Year borrowed 1628 1628 1640 1647
1647

403

Rate of interest per month 1%


1/2%

Remarks and References Raised by factors. F. 1624-29, 215. Loan against gold pledged with lender. F. 1624-29, 270. Rates on English borrowings.F. 1637-41, 225. Rates on English borrowings.F. 1646-50, 112.
Lower rate than this not allowed by lenders

Rs 10,000 Rs 8,000 -

above 1 /4% above %%


/16%

1658 1658

Rs 24,000 -

%3/%

/ %

on English borrowings. F. 1646-50, 128. Debt contracted by local factors. F. 1655-60, 163. Surat factors arrangefor credit at Ahmadabad at this rate. Ibid.

AGRA Year 1628 1645 1645 1645 1645 1645 1647 1654 Amount borrowed Rs 57,000 Rs 12,000 Rs 21,000 Rate of interest per month
3 % %%

Remarks and References Loan raised by factors. F. 1624-29, 239. Rate at which sarrifs accepted deposits. F. 1642-45, 302-3. Rates at which sarrafs advanced loans. Ibid. Rate on English debt incurredpreviously. Ibid. Reduced rate on English debt. Ibid. Rate on fresh English loans. Ibid. Rate on English borrowings.F. 1646-50, 122. No outsider willing to borrow at this rate from Company. F. 1651-54, 301-2.

1 to 21/2% 1%
3/4%

%% %%
3/4%

vanced for short terms only.41Interest,however,was not compounded.No referenceto compoundingoccurs in the English records;and at one place wherethe total amountof interestdue on a given sum at a particular monthly rate for a period of over one year is calculated,the resulthas been obtained the by simply multiplying monthlyintereston the principalby the number of monthsin the period.42 In studyingthe rates given in the tables it may be borne in mind that the rates are mostly those at which the English factors borrowedon behalf of the Company.These need not have representedthe rates prevalentin the market.In fact, it appearsthat they were generallya little higher than the
Cf. the advice given by the Surat factors to the Company in 1652 that loans raised in India were "at times only for a month" (English Factories, 1651-54, p. 86). 42 Principal: 10,000 pagodas; rate: 1l/2% per month; period: 9.iii.1646 to 29.vi.1647 (= 153 months). Total amount of interest, as calculated: 2,350 pagodas. (English Factories, 1646-50, p. 213).
41

404

IRFAN HABIB

THE DECCAN Year Place Amount borrowed Rate of interest per month 2 & 21/2% & 2%/2 3% 1 /2% 1/s % 1 1/16 % 1%/%
11

Remarks and References English debt. F. 1634-36, 140. English debt. F. 1634-36, 295. English debt. F. 1646-50, 112. Rate on English debt quoted as 13 /2% p.a. F. 1646-50, 155. English debt. F. 1646-50, 308. Lowest rate current.F. 1646-50, 213. Rate current. F. 1651-54, 222. English factor's loan to broker. Rate quoted as 15% p.a. F. 1665-67, 104-5.

1635 Masulipatam 10,000 or 12,000


pagodas *

1636 Masulipatam 1645 Golkunda 1647 Raybag 1647 Golkunda 1648 Madras 1654 Coromandel Coast 1665 Madras

16,000 pagodas 20,000 rials 10,720 great pagodas 10,000 old pagodas -

1,200 pagodas

11/ %

Pagoda = 4 to 5 Rupees.

market rates. Thus the English seldom succeeded in securing the same rates as lenders as the ones they paid as borrowers.43The Company seems to have often entertained the suspicion that its factors overstated the rates at which they could borrow. It is, therefore, quite possible that the progressive decline in the rates that one sees in the above tables, especially under Surat, was due to the increasing watchfulness of the Company in this respect. It appears from the tables that the rate of interest at Surat generally varied from Y2 to 1 % per month; and this seems to have been broadly true of the rates at Ahmadabad and Agra as well. But in the Deccan, notably in Golkunda and on the Coromandel Coast, the rates were distinctly higher, fluctuating between 1 and 112% per month. For the moment, this difference between rates prevailing in two parts of the country cannot be explained. A matter requiring still greater attention is the difference that existed between interest rates in Europe and India. We find the English factors in India repeatedly impressing upon their superiors in London the loss that the Company incurred by borrowing in India to finance its trade. They here paid "double the interest which is exacted in England" (1650).44 In England money could be borrowed at 4% per annum, while at Surat the rate was 7,1 if not 9% (1659).45 It was stressed that owing to this difference, it would have been profitable for the Company to send money to India, simply to be employed
43

44
45

For such cases see, especially, SURAT 1665 and AGRA 1654 in the tables above. English Factories 1646-50, p. 278. Ibid. 1655-60, pp. 158, 199.

USURY IN MEDIEVAL INDIA

405

in usury:And "You need not feare bad debts",the Companywas told, "for
money at interest never faile of good securitye" (1660).46

Besides ordinarycommercialcredit which we have been discussing,i.e.,


secured loans or loans advanced to merchants commanding confidence, there

investment wherethe lenderbore considerable were also formsof speculative risks. Thus we hear of a practice called in the English records "awg"or
"avog", obvious corruptions of an Indian name which it has not been possible so far to identify. It is parenthetically explained at one place as being the same as bottomry ("bottomarie"). Another passage shows that in "avog" the

money borrowedwas laid out in cargo to be shippedto a particular place, the lendersbearingall risks of the voyage. The rates chargedin "avog"were naturallyhigh. For the voyage betweenSurat and Gambroonin the Persian Gulf, they are said to have variedbetween 14 and 18% (1640); and in 1669 certainSuratmerchants were reportedto have taken up money at "avog"at "44, 50 and 60 per cent."for a voyage to the Philippines.47 It is impossible,of course,to computethe amountof finance availablefor commercialtransactions any time in medievalIndia. But it was probably at never negligible.For this the ability of the English to finance their entire trade with India from money raised here, may be offered as a convincing testimony.In 1645 at Agra alone they had a debt of Rs 80,000.48In 1650 the Suratfactorswere sure they could raiseL 20,000 (= Rs 180,000) at any time they liked;49 two yearslatera singlecreditorlent themRs 200,000.50 and 1660 the English Company'sdebt at Surat had gone up to L 70,000 By "a (= over Rs 600,000); 51 and in 1669 its factorsagaincontracted vast debt at interestto the amountof 600,000 rupees".52 the same time the Dutch At Companywas believed in 1639 to have raised as much as Rs 800,000 in
India at the rates of 11 and 1 /2% per month.53

If the Englishrecordsare any guide, merchantsthemselvesby lendingto each other provideda large part of commercialcredit.54 biggestcreditor The of the Englishat Suratwas Virji Vora, who for nearlyforty years lent them
Ibid. 1655-60, p. 215. The two basic passages, from which our information on "avog" as given here is derived, are in English Factories, 1637-41, p. 272, and 1668-69, p. 195. See also ibid. 1634-36, p. 232 & n., 1655-60, p. 235 n. and 1665-67, p. 202. 48 English Factories, 1642-45, pp. 302-3. 49 Ibid. 1646-50, p. 316. 50 Ibid. 1651-54, p. 119. 51 Ibid. 1655-60, p. 214 n. 52 Ibid. i668-69, p. 193. 53 Ibid. 1637-41, pp. 116-17. 54 That merchants supported the money market to a very large extent is suggested by statements such as the following (Surat, 1665): "Money is not now procurable at interest here, as in former times, for since Sevages [Sivaji's] robery of this towne [1664] those eminent merchants who were wont to furnish the Companyes occations are disabled, and would rather take up moneys to supply their owne; they are generally so disjointed in their credits and estates that they will not trust one the other". (English Factories, 1665-67, pp. 19-20).
46
47

406

IRFAN HABIB

Despite his very large sums of money, often runninginto lacs of rupees.55 or he being occasionallydescribedas "money-lender" "sheroff",56 was prethat he lent them only Indeed,the Englishcomplained eminentlya merchant. for He to secureadvantage himselfwhenbuyingtheirgoods.57 did not usually his capital in usury, it being said of him and anotherleading Surat employ merchantthat both of them were "prodigiousmoneyed men, who having alwaysvast treasureready in house, doe esteeme it safer investedin (such) sollid unperishable comoditysthoughthey get but 4 and 6 per cent. by them, then eitherin cash or at interestor avog".58 a rule, while merchants As might invest the idle cash on theirhandsby lendingto othermerchants discountor ing their hun.dis,there was a separateclass of persons, known as sarrafs ("shroffs"),who really specialisedin the provisionof commercialfinance. The sarrafstoo sometimesengagedin trading,but for them commercetook a second place to usury and banking.The separation betweenthe merchants and commercial usurersis strikingly broughtout in the accountof an incident that took place at Ahmadabad 1715. The sarrafsof that city had a leader in of their own, at whose behest they raised the rate of anth or discount on made against hun.ds. Thereuponthe merchants,headed in cash-payments theirturnby the nagar-seth (chief merchantof the city), suspendedbusiness; and there was a threatof even armedclashes between the two sides.59 is It possible that the sarrafs,who, as we shall see, accepted deposits,provided commercewith capital that was in part at least purely non-mercantile in origin. The State occasionallyservedas yet anothersourceof commercial finance. Sultan'Ala'u-d Din Khalji(1296-1316) is said to have encouraged flow of the tradeby givingloans to merchants. advanced sums amounting 2 million to He tankas to"wealthyMultanis",requiringthem "to bring commoditiesfrom various parts of the country and sell them at rates fixed by the Sultan"at Dehli.6?0 Whetherhe demandedinterestis not recorded.In the 17th century
A few examples of Virji Vora's money-dealings with the English may be provided. In 1635 he gave a letter of credit for Rs 20,000 (English Factories, 1634-36, p. 114) and a little later offered them Rs 200,000 even at a time of commotion (ibid., p. 216); in 1645 he lent an amount equal to 20,000 rials at Golkunda (English Factories, 1646-50, p. 18) and in 1647, 10,000 old pagodas (= Rs 50,000), again at Golkunda (ibid., p. 308); in 1669, he and his family together with other "sheroffs" lent to the English at Surat Rs 400,000 (English Factories, 1668-69, p. 193). 56 English Factories, 1655-60, p. 159; ibid. 1668-69, p. 193. 57 Ibid. 1642-45, p. 108. Cf. also ibid. 1655-60, pp. 158-9. 58 Ibid. 1668-69, p. 184. Cf. ibid. 1655-60, p. 215, where it is said that "Virgee Vorah is the only master of it (money, at Surat), and he is so close fisted that for the consideration of no interest cannot yet be procured of him". 59 Miryat-iAhmadi, I, pp. 410-11; see also pp. 405-07. 60 Barani, T?rrikh-iFiruz-shahl, Bib. Ind., p. 311. See also The Rehla of Ibn Battuta, tr. Mahdi Husain, p. 41, and CAfif, Ta4rikh-iFiruz-shahl, Bib. Ind., pp. 293-4. Where Barani speaks of "Multanis",Ibn Battuta and 'Afif speak of merchants in general. The authoritative 18th-century dictionary, Bahdr-i 'Ajam (s.v.), defines "Multani" as the general name for a Hindu in Central Asia and Persia, and explains that this was so
55

USURY IN MEDIEVAL

INDIA

407

we read of a large loan of half a million Rupees advanced at Shahjahan's orders from the imperial treasury to one "Munnodas Dunda" to enable him to purchase the entire supply of indigo in the Empire, of which he had been given the monopoly. No interest as such seems to have been charged; but the monopolist was required to repay the loan within three years, together with Rs 600,000, in three equal instalments out of his profits.6t From the reign of the same Emperor comes other evidence of loans made from treasuries and mints to merchants. In one case, the Governor of Surat extended a large loan, interest-free, to the English against bullion deposited in the mint.62At another time, the Surat factors expected to borrow Rs 20,000 or 30,000 from the Surat mint and the Governor's treasury.63The English factor at Thatta (Sind) once complained that money was scarce there, and as soon as the mint turned out any money, "the merchants here pay it to the King's diwan [revenue and financial officer] in satisfaction of advances made by him".64No reference to interest is made, but it would be surprising if it was not charged.

Indebtedness among the Ruling Class The medieval ruling classes consisted largely of men who were the King's servants. These persons derived their income from salaries sanctioned by the King, in lieu of which they were assigned territories, known in the earlier centuries as iqtd's and under the Mughals as jigirs. Within the territorial assignment the King's taxes, in particular the land-revenue, were alienated, for the period of assignment, to the assignees. Since the land-revenue itself accounted for the bulk of the surplus produce from the land, the resources at the command of the nobles must have been enormous. However, the expenses of the nobles kept pace with their income; and it seems to have been common for them to anticipate in their spending the actual collection of revenue, which could be made only at the time of the two harvests, in autumn and spring. With all their wealth, therefore, they were compelled to have recourse to the usurers, who were in return granted a claim on the collections in the assignments. Thus on the very morrow of the Turkish conquests, the conquerors appear in the position of debtors to a class of their subjects. In an account relating to the period of Sultan Ghiyasu-d Din Balban (1266-87), we are told that
because the Hindus settled there originally came from Multan. "Multani",when used by Barani, would therefore seem to mean a Hindu merchant. 61 English Factories, 1630-33, pp. 324-25.
62 63

Ibid. 1634-36, p. 68.

64

Ibid. 1637-41, p. 193. Ibid. 1646-50, p. 72; also p. 101.

408

IRFAN HABIB

"the Multanisand Sahs of Dehli, who becamepossessedof great riches,got of them from out of the wealthof the old nobles and commanders Dehli, for the latter borrowedbeyond limit from the Multanisand Sahs, and gave the creditorstheir due, together with largesses, from (the revenues of) their iqtfas." 65 In Mughaltimes too the nobles seem to have generallyborrowed An againstthe revenuesexpected from their jagirs, or assignments. officer wouldhave deprivedof his jagirexplainedthat "hadhe a jagir,the mahajans Simigiven him somethingby way of a loan" and so alleviatedhis distress.66 when the Englishattempted recoveryof a debtfrom a Rajputnoble the larly, of Shahjahan,they obtained "writeings" the repaymentof the debt in for annualinstalmentsto be realised "in two equall portions and at the tymes when his yearely rents comes in, proceedingfrom come, etc.", necessitating of personalattendance the creditors'agent in the noble'sterritory.67 The Mughalnobles also appearto have inherited habitof theirTurkish the of predecessors borrowing "beyondlimit"and payingthe lendershandsomely for their service. The English factors noted in 1645 that the "sheroffs"at Agra were tempted "for lucre" to dispose of "greatsummes to persons of On qualletieatt greaterates".68 the eve of the Warof Successionof 1658-59, Prince Muradraised as much as 1.1 million Rupees at Ahmadabad, half of it from the sons and brothers of Santidas Sahi and the rest from other for "merchants", the repaymentof which he issued drafts on the revenues of certainports and parganas(sub-districts) Gujarat.69 elder brother, of His seems to have borrowedmoney by issuing "bills of debt";70 but the Shuja', total debt he contractedis not known. Nobles were perhapsnot averse to lendingto each other. We are told incidentallyof a loan of Rs 300,000 extendedby Sha'istaKhan, Governorof Bengal, to his subordinate, goverthe nor of Hugli, at 25% per annum.71 This last transactionconfirms the general statementmade by the Agra factorsthat the rates on loans advancedto nobles were quite high. It is not surprisingthat the professionalusurerswere very jealous of their right to interestin their dealingswith membersof the rulingclass. It is recordedin a despatchfrom Aurangzeb's courtthat when (in 1702) that Emperorsought
65 Barani, T&cr1kh-i Firuz-shahl, p. 120. Barani adds that "whenevera grandee or noble

held a majlis (convivial gathering) and invited great men as guests, his stewards rushed to the houses of the Multanis and Sahs, gave them notes of hand in their own names, and took loans on interest, (and) brought (the requisite things) to the majlis of that munificent noble". 66 Waqaic-i Ajmer, ZiqaCd, rd regnal year (Aligarh transcript,p. 413). 23 67 English Factories, 1651-54, p. 84. MiPadt-i Ahmadl, I, pp. 238-41. "Satidas" in the Persian text is a misreading for "Santidas".Santidas Sahufwas a big banker and jewel merchant, enjoying considerable influence at Shahjahan'scourt. He is also referred to many times in the English Factories. 70 English Factories, 1668-69, p. 177.
71 68 69

Ibid. 1642-45, p. 302.

Ibid., p. 299.

USURY IN MEDIEVAL INDIA

409

an interest-free loan (quarg-i hasana) of half a million Rupees from the "sahiikars of the Imperial Camp", to enable him to pay the arrears of salary of his troops accompanying him in the Deccan, the usurers politely refused. They represented that "if the Imperial Court takes (such) a loan, the news will reach the provinces; and (then) the Governors too will extort (such) loans, which will mean the banishment of all sahas".72 The high rates of interest which the nobles had to pay to their private creditors seem to have suggested to Emperor Akbar (1556-1605) the desirability of advancing loans to his officials out of the imperial treasury. According to Abui-l Fazl's official account, "any iqtacdar (= jagirdar, holder of a territorial revenue-assignment) or a recipient of monthly (cash) salary" could apply for such a loan, which bore the technical name of musi'adat (lit. favour, assistance). The loans were not interest-free, but the interest was supposed to be on such a scale as to offer an example to "the unjust interestaugmenting ones". It was not taken periodically but realised along with the principal at the time of repayment. Since Abu-l Fazl has given us the total amounts repayable in terms of the principal after the passage of different numbers of years, it is possible to work out the annual rates of interest for each period of years (remembering, however, that we are calculating on the basis of compound, not simple, interest). These rates are set out in the table below. Ratio of Amount due to Principal 17: 16 9: 8 5: 4 15: 10 15: 10 15: 10 171/2: 10 171/2: 10 171/2: 10 20: 10 Annual Rate of Interest 6.25 % 6.10% 7.70% 10.70% 8.40 % 7.00% 8.30 % 7.20% 6.40% 7.40 %

Years completed 1 2 3 4 5 6 7 8 9 10

It was prescribed that no further enhancement be made in the amount demanded after it had become exactly double the principal at the end of the tenth year.73
Akhbarat-i Darbar-i MuCalla, Shawwal 16, 46th regnal year (Royal Asiatic Society Library, London, Case 47, 46/25). 73 Abu-1 Fazl, Alin-i Akbari, ed. Blochmann, Bib. Ind., I, pp. 196-7.
72

410

IRFAN HABIB

Musa'adat thus seems to have cost the borrower between % and 34% per

monthin interest.Comparing these rateswith those prevailing commercial in usury,we can see some justice in the claim put forwardby Abi-l Fazl that his mastercould serve as a model for other usurers. We may, therefore, expect that Mughal officers would generally have preferred to obtain musa'adatrather than borrow from private moneylenders.However,althoughAbu-l Fazl is silent on this point, there is reason to believe that musa'adatwas not normally grantedunless certain special circumstancescould be urged. An official, deprivedof his jagir and not on assignedanother,appealedfor musacadat the groundthat it was not possible for him to borrowfrom mahajans the absenceof a jagir.74 Most often in it was duringmilitaryexpeditionsand campaigns,when the nobles had to incur exceptionally large expenditureand naturally found it difficult to borrow from private sources, that large amountswere sanctionedfor disbursementas musaaadat. two successiveyears, duringthe War in Balkh For and Badakhshan(1646-47), Shahjahan orderedmusa'adat be grantedto to each individualofficer participating the campaigns,equal in amount to in
one-fourth of the annual revenues of the borrower's jagr.75 Similarly, during

the RajputWar of 1680, the official intelligencer reportedthat "mostof the jagirdars(posted with the army),makingan excuse of the distanceand low revenuesof their jagirs, keep arguingwith Padshah Quli Khan (the Commander), demanding musa'adat."76

The amountof mustaadat, once advanced,became part of the mutdlaba, or the State's total claim against the officer concerned.77 Just as private creditorsobtained repaymentof their loans throughthe debtor'sdrafts on their jagirs, so also the mutalabawas "repaidout of theire (the officials') From one specific instance, it appears that the Government jaggeers".78 affectedthe recoveryof its advancesby despatchingagents to the debtors' jagirsto seize the amountsdue to it from the revenuesbeing collectedthere.79 The servantsand hangers-on the nobility,and otheridlers,also provided of a profitableclienteleto the usurers.Soldiersgenerallyfell into debt because who were they were not paid their salariesregularlyby their commanders, also generallytheir employers.They were thus "obligedto borrow money from the sarrafs, or money-changers", who were said to have usually an with the officers about "the profit from interest which they understanding
Waqfi-i Ajmer, Zi-qad, 23rd regnal year (Aligarh transcript,p. 413). cAbdu-lHamid Lahori, Padshahnama, Bib. Ind., II, pp. 507, 670-71. 76 Waqrt1-iAjmer, Shacban,23rd regnal year (Aligarh transcript,p. 622). 77 "The Kings mutalba which are moneyes lent out of the Kings cussana (khazana, treasury) to umbrawes (umara', nobles) when they are imployed in any warr" (English Factories, 1655-60, p. 67). 78 English Factories, 1655-60, p. 67. 79 Waqd?ic-i Ajmer, Rajab, 21st regnal year (Aligarh transcript, p. 22), concerning recovery of musaiadat from the jagirs of some Rajput officers serving in Kabul.
74
75

USURY IN MEDIEVAL INDIA

411

In share between them".80 an earliercenturySultan Firiz Tughluq(135187) advancedmoney to his own troops duringa campaign,but we are not told whetherhe took interest.81 It appears that there were certain persons who financed gamblers.An Indian dictionary,compiled in 1739-40, defines jahezgzras a person who advanced"loansto gamblersin need of money, at the rates of 50 per cent and 100 per cent. (per transaction per month?)".82 or
Usurers' Capital

Capitalemployedin usurycould conceivablyoriginatein eitherof two ways: from gains made by the previousemploymentin usuryof the nucleusof the of presentcapital;or from wealth acquiredin other departments economic life now channelled into usury.In a primitiveagrarian the two sources society may be completelyintermixed,since usuriouscapital itself may not exist as a separateentity. A ruralexploitermay claim a direct share in the produce of the land on the basis of a socially recognisedright and then extort from the cultivatoran additionalamounton accountof havinglent him seed and cattle. The formationof a separate class of professionalusurers,making theirgain exclusively from usuryand enlarging theirstock solely frominterest so gained, may be the mark of a certaineconomic developmentof society. This separationof usury from other forms of exploitationoccurredearly in the historyof civilizedcountries;and India is no exception.The separation finds its legal expressionin the ban on usuryimposedfor the highesttwo of the four Indian classical castes (varnas), namely, the Brahmanas and and as Kshatriyas, its assignment, a legitimateoccupation,to the third,or the caste.83 Vaisya, In medieval India this caste-specialisation usury, inheritedfrom the in ancient times, seems to have continuedin full strength. True, as we have seen, the State and membersof the nobility were not averse to lending at interest;and there must have been many Muslims,like the usuriouskhwaja of Amir Khusrau,84 lived on usury.But by and large,throughout who medieval times,professional remained occupationof personswho claimed the usury to be the descendantsof the ancientusurers.A well organisedHindu caste
Manucci (c. 1700), Storia do Mogor, tr. W. Irvine, II, p. 379; in another passage (ibid., IV, p. 409) of similar substance the lenders are said to be "traders",not sarrafs. See also Fryer, A New Account of East India and Persia being Nine Years' Travels, 1672-81, I, p. 341. 81 Shams Siraj CAfif, T`rikh-i Firuz-shahl pp. 220-21. 82 Tek Chand s.v. 'Bahar', Bahir-i CAjam, jahez-glr. 83 Manusmriti, 1.90; X.117 (tr. Buhler, Laws of Manu, Oxford, 1886, pp. 24, 426). Brahmanas and Kshatriyas could resort to money-lending when in distress, but even then they were to lend to "sinful"persons only and charge low rates of interest. 84 MatlaCu-l Anwar (Aligarh, 1926), p. 174.
80

412

IRFAN HABIB

was in existence, that was thought to be the same as the ancient Indian Vaisyas ("Bais"). It bore a different name, however, viz., "Banya" or "Banya" (from Sanskrit, "Banik"), and was given in Indo-Persian the slightly confusing name of "Baqqal".85 Members of this caste who engaged in usury were known as saihs, sahukars and mahijans, the names persisting till today. Another group within the "Banya" caste was formed by sarrafs (or "shroffs" of AngloIndian usage), who were in the strict meaning of the word money-changers, but also acted as money-lenders, especially in the commercial world.86 It may be expected that with particular castes specialising in usury, usurious capital should largely have been the result of self-generation, and so limited in size. But it seems that in medieval times forms had already developed of the usurers' raising money from other strata of the population and so expanding their capital. Thus we have evidence of deposit-banking in a rudimentary form, with the sarrafs in particular setting up as bankers. The historian, Sujan Rai, writing in the later years of the 17th century, considered the institution of deposit-banking to be one of the achievements of his country. He tells us that the sarrafs accepted deposits (amanat) from all, and scrupulously paid them back on demand ('inda-t talab).87A passage in a letter from the English factors at Agra, written in 1645, gives us an interesting glimpse of the system of "banking" of the period. Those that are great monied men in the towne, and live onely uppon interest receive from the sheroffs [sarrafs] noe more than % per cent. per month. The sheroffs they dispose of itt to others [at] from 1 to 2%/2 cent., running some per hazzard for the same, and that is their gaines. Now when a sheroff (for lucre) hath disposedof great summesto personsof qualletieatt greate rates, not suddenly to be call'd in to serve his occasions, then beginn his creditours(as in other partes of the world) like sheepe one to runn over the neck of another, and quite stifle his reputacion.Thus... hath two famous sheroffs bynn served within a moneth, one of which faileing for above three lack [300,000] of rupees, diverse men have lost great somes and others totally undone therby;which hath caused men of late to be verie timerous of putting their monies into sherroffs hands.88 These general statements are substantiated by specific instances. We read of a baqqdl (grain-merchant, or banya) claiming to have deposited a sum in cash 85 The statements the in two are Akbarl, preceding sentences basedon Abiu-Fazl,A'In-i

88 EnglishFactories, 1642-45,p. 303.

ed. Blochmann, Bib. Ind., II, p. 57; and Dabistdn-i Mazdhib (Bombay, n.d.), pp. 121, 123, 125 & 160. Baqqdl had also the more limited meaning, in Indo-Persian, of grainmerchant, although in Persia it meant a grocer or fruit-seller (Bahiir-i cAjam, s.v.). Cf. Hodivala, Studies in Indo-Muslim History (Bombay, 1939), p. 672. In the English and other European records, the corrupt form "Banian"is used for the name of this caste. 86 Van Twist, c. 1630, tr. Moreland, Journal of Indian History, XVI, p. 73, speaks of "banyan money-changers, called here Paraffes", an obvious misspelling of "Saraffes". Tavernier says that members of the caste of "the Banians" were either "shroffs, i.e. money-changersor bankers",or brokers (Travels in India, 1640-67, tr. V. Ball, 2nd ed., ed. Crooke, London, 1925, II, pp. 143-144). ?arrdf is a purely Arabic word; but in India, whether in Persian records or in English, it is never applied to a Muslim. 87 Khuldsatu-t Tawdr?kh,ed. Zafar Hasan (Delhi, 1918), p. 25.

USURY IN MEDIEVAL INDIA

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and kind with two mahajansin a locality of Rajasthan.89 Englishin the The the beginningseem to have kept all their cash with sarrafs.90 Subsequently, factors at Suratreportedto the Companythat the sarrafswould allow them interest at 71/?%per annum on cash deposited with them.91The interest which the usurersallowedon these depositseven temptedofficials to invest funds of the Governmenttreasurywith them. An intelligencer's report of accuses a revenue-assessor and collector (karor) (amin) Aurangzeb'sreign in the Ajmer province"of conspiringwith the treasurer(fotadar)to deposit for the cash collected(by them) with the mahajans (long) periodsat interest and of ignoringthe treasuryaltogether.92 and profit for themselves", It is unfortunately impossibleto estimate either the amount of deposits with the usurersor the proportionwhich these depositsbore to their placed existed in some form or anotheris, howtotal capital.That deposit-banking ever, in itself a very significantfact. It implies that commodityproduction had become so extensivethat the usurers'own resourcesno longer sufficed to meet the demandfor creditit created;and they had to establish,through a deposit-banking, channel for the diversionof part of the non-mercantile of society to commerce. wealth

The State and Usury

Usury flourishedin medievalIndia with the full sanctionof the State. This at may appearsurprising first because the medievalkings of India were all and Islam forbidsusury in absoluteterms.Yet the most orthodox Muslims, of medievalrulers,Aurangzeb,hastenedon his accessionto assure"all the merchantsand mahajans(professional and money-lenders) the residentsand of inhabitants(of Ahmadabad) our justice and good treatmentof (our) subAnd, even in his last years, when his orthodoxyhad become almost jects".93 at fanatical,he acceptedwith equanimitythe refusal of the money-lenders his court to lend to him withoutintereston the explicit groundthat, in that case, his governorstoo might refuse to pay them interest.94 In fact, the medieval State extended its full protection to the creditor. Here unwritten customs,ratherthanthe jurists'codes of Muslimlaw, seem to have been followed. When the English factors suggestedto the Company that a debt be recoveredby applying"to the justice of the country",they went on to explainthat "mostof our dealingsin these partsare done by word
90 This appearsfrom English Factories, 1634-36, p. 169, which refers to the Company's order forbidding the factors from keeping their cash outside their factories. 91 Ibid. 1655-60, p. 199. 92 Waq&aic-i Ajmer, Rajab, 21st regnal year (Aligarh transcript,p. 27). 93 Mir'at-i Ahmadl, I, p. 240. 94 Akhbarat-i Darbar-i MuCalla, op. cit.
89 Waq&ic-i Ajmer, Rajab, 21st regnal year (Aligarh transcript, pp. 29-30).

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IRFAN HABIB

of mouth, without any writings, and is good amongst the people; whereas in The claims for recovery of debts were usually England our law is intricate".95 before the secular officials of the administration, and not before preferred qazis, the Muslim judges. References to such suits are too numerous to be cited, but two examples may suffice. We find two successive faujdars (Governors) of Ajmer trying a suit for the return of deposits kept with some mahajans: they both gave judgments partly in favour of the suitor and took steps to enforce recovery.96Similarly, certain local merchants who had purchased bad "bills of debt" from an Englishman, "cited" the English factor at Patna, "before the Nabob (Nawwab, Governor) of Pattana, by whose sentence he was forced to pay the money".97Such disputes could actually go up to the Imperial Court. Emperor Jahangir (1605-27) records in his Memoirs his trial of a suit for Rs 80,000 claimed from certain Saiyids of Lahor.98 The texts of several imperial orders issued on petitions for recovery of debts submitted to the imperial Court have been preserved. These are usually addressed to the local officials, directing them to investigate the complaints of the petitioners and, if they found them to be true, to force the debtors to pay.99 There is no reference anywhere either to the inclusion or exclusion of interest in or from what the State regarded as rightfully due to the creditor. In practice, in any case, the exclusion would not have had much significance, since the careful lender could always compel the debtor to attest in writing to a larger amount than had actually been lent.100 The creditor did not, however, always come away unscathed once he was obliged to appeal to the administration. As a rule the wheels of government did not move until well oiled by bribery. In the reign of Shahjahan, at any

rate, it seems to have been a commonpracticewith Mughalofficialsto claim


a fourth part of the debt which they recovered on behalf of any suitor.101 Aurangzeb, immediately after his accession, is said to have forbidden this
95 English Factories, 1665-67, p. 265. 96 Waqiic-i Ajmer, Rajab, 21st regnal year (Aligarh transcript,pp. 29-30). 97 English Factories, 1668-69, p. 177. 98 The suit was preferred before the Emperor through the Qazi and Mir 'Adl (minister concerned with justice) at the Court. At first Jhahangir ordered that they should follow the Sharicat (Muslim Law) in deciding the case. But on being told by his intimate secretary, MuctamadKhan, that the Saiyids were very emphatic in denying the claims against them, the matter was referred by the Emperor to Asaf Khan, a leading noble at the Court, who was to enquire into the truth of the claims. Ultimately the suitor confessed to forgery and was punished for it (Jahangirnama, ed. Syud Ahmud, Ally Gurh, 1864, p. 306). Thus in the actual process of deciding the case the Sharicatwas disregarded. 99 See, for example, Durru-l cUlum, MS Bodleian, Walker 104, ff. 43a, 47a, & 54b. Shahjahangranted the English a farman directing his noble, Rao Satrsal Hada, to repay the debt his father owed them (English Factories, 1651-54, p. 84). 100 This is a common practice with the Indian professional money-lenders today, who thus circumvent the various provisions of the law designed to protect the debtor. 101 English Factories, 1634-36, p. 270; 1655-60, p. 75.

USURY IN MEDIEVAL

INDIA

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practice in express terms.102The actual text of his order prohibits officials from making any gain whatsoever out of recovering debts.103 That the Emperor's bans and prohibitions were far from effective is shown by the need he felt to forbid afresh the officials' custom of taking a fourth of the recovered In debts, nearly fifteen years later.104 1668 we find a reference to an English factor promising to the Governor of a town a third of the debt he was seeking to recover, as if the imperial orders had not been heard of.105The same tacit defiance appears to have prevailed at the imperial Court itself. When the creditors of an English factor, who died in 1665, petitioned the Court for the recovery of their debt from the English Company, it was expected by the latter's servants that "what verdict they shall get upon us by the Kings order must be by bribes, or a promise to the partie that procures it, the halfe or a quarter of the award (a usuall practice for the getting in of desperate
debts)".106

In this atmosphere of corruption, the hands of the officials could, conversely, be stayed by rich and powerful debtors. When the above-mentioned petitions were submitted to the imperial Court, what actually happened was that Aurangzeb's finance minister, Jafar Khan, unceremoniously tore them up and turned the petitioners out of court, because the English had kept "good correspondence" (which implied gifts and presents) with him.l07 A clause in Aurangzeb's regulations had to warn officials against taking the side of "merchants and others who show negligence in repaying their debts".108 At the same time, the debtor, if he was poor, enjoyed hardly any protection. We may recall from Jauhar's reference to loans contracted by Afghans in the Panjab, that human pledges were not regarded as illegal, although their fate might arouse the compassion of even a revenue-collector.109 clause A in Aurangzeb's regulations describes it as a practice then current, that "Hindus and Muslims, who advance loans to some persons, and take and keep their (the debtors') children as security for the loans, fix the prices of the children and seize them, if the debts are not paid".110 Aurangzeb did in fact declare this practice to be illegal, but how far his prohibition was effective is difficult to judge. Officials themselves, when enforcing the recovery of a debt from which they stood to gain, did not spare the person of members of the debtor's family. An English factor at Ahmadabad reported that it was not possible to recover debts from certain persons who were "exceeding poore", and,
102 103 104 105 106 107

Khafi Khan, Muntakhabu-l Lulab, Bib. Ind., p. 88. Mi?at-i Ahmadi, I, p. 251. Ibid., I, p. 287.

English Factories, 1668-69, p. 165.


Ibid., 166567, p. 160. Ibid., pp. 265-6.

108 MS Bodl. Fraser 86, f. 94b. 109 Mihtar Jauhar, Tazkiratu-l WaqiCat, MS Brit. Mus. Add. 16, 711, f. 132a-b. 10 MS Bodl. Fraser 86, f. 94a.

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IRFAN HABIB

therefore,recommendedthat a fourth part of the debt be offered to the for Governor; "thenthe Catwall(kotwal,head of the city police) will tare it
out of the sides of them or sell their howse, wife and children to pay it".11

Religion and Usury MedievalIndian society containedwithin its fold two independentreligious systems, Hinduism and Islam, between which there was hardly any direct markedin the was particularly of intercommunication ideas. This separation field of law, since the jurists of both Hinduism and Islam had separately developed,and then closed, their codes of law long before the beginningof the Indianmedievalperiod.On the questionof usurythe two religionsadopt positionswhich are impossibleto reconcile. The ancient Indian (or "Hindu")law permittedusury, but restrictedits professionto the Vaisya caste. Certainlimits were imposed on the rates of interest.On loans securedagainstpledges, the rate of 114% per monthwas sanctioned;but in other cases, progressivelyhigher rates were authorised, with a maximumof 5% per month, according,inversely,to the caste of the borrower.Compoundinterest was forbidden, and the creditor could not claim in repaymentan amountmore than double the principal.112 Certainelementsin these rules appearto agreewith the actualcustomand practicein medievaltimes. Paymentof interestby the monthis one example. the Similarly, rates of interestcurrentin medievaltimes fall generallywithin the limits prescribedby Hindu law, althoughno one in those times would have thought of varying his rate of interest accordingto the caste of the borrower.In commercial usury,at least, compoundinterestwas not charged. The prohibitionagainstthe repayableamountexceedingthe principaltwice over seems to have been paid heed to by Akbar,when laying down the scale
of repayment of musd'adat.l13His Court indeed seems to have been well

familiarwith the relevantprovisionsof the Hindu law on usury.14It could in be arguedthat the very fact of the banya caste's specialisation usury is a tribute to the persistentinfluence of the Hindu legal system. But here we should better speak of the persistenceof a whole body of custom that was itself one of the sourcesof Hindu law ratherthan its product. In contrast,the Islamiclaw on usuryhad in its originno connexionwhatsoever with Indiancustom and practice,with which it provedto be at complete variance.Whateverthe originalpracticein the Arabianpeninsulathat provokedit, the Quranicprohibitionof riba (usury)is so firm and explicit
111 English Factories, 1655-60, p. 75.
112 114

113 Abu-1 Fazl, A'in-i Akbari, ed. Blochmann, I, pp. 196-7.

Manusmriti, tr. Buhler as Laws of Manu (Oxford, 1886), pp. 278 & n., 280 & n.

These are very accurately summarised in ibid., II, pp. 148-9.

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that it logically covers all gain, and not merely excessive gain, obtainedby the creditor.Islamicjuristsare unanimousin condemning usury in all shape in and form, and have shown no little ingenuityand earnestness discovering and forbiddingusuriousgain lying behind what apparentlyare simple acts of exchange.115 It was obviouslyimpossiblefor such an absoluteprohibitionof usury to be enforcedin societieswith more or less developedmercantile economies.116 Thereforein the Islamic ethical tradition,in India at any rate, two distinct strandsare found in the attitudetowardsusury.On the one hand, there is a generalhostilitytowardsit, based on the law of the faith; and, on the other, there is a reluctantrecognitionof its unavoidability. Thus the famous IndoPersianpoet, Amir Khusrau,writingin 1298-99, declaresthat "in no reliis gion, underany circumstances, the gain of the usurerand gamblerregarded and as legitimate", prefacesthe statement references a Muslimfinancier to by to month, without shame, on interest.117 A (khwaija), living from month contemporaryof the poet, the historian, Zia'u-d Din Barani, deprecates wealth in that it provides "to the greedy and unmanlyones the means of Yet engagingin usuryand engrossing".'18 in his counselsfor good administrathe while recommending prohibitionof engrossing,he ignores usury tion,
altogether.119

This duality in attitudeis found even in the treatmentof usury by an orthodox theologian like Shah Waliullah of Dehli (1703-62). He repeats first the legal view that riba means the takingof any gain from any kind of loan, and pronouncesit completely "unlawfuland sinful". He then seeks A on to justifythe prohibition severalgrounds. poor debtoris forcedto accept harshterms,and so the contractbetweenhim and the lenderis not voluntary. Since, moreover,the poor cannot pay in time, they become subject to an increasingburden. Usury also leads to disputes and conflicts among the people. Finally, since it is an unproductive way of increasingone's wealth, then, says Waliullah a little naively, if it became more widely prevalent, and But peoplewouldtend to abandonagriculture craftsaltogether. Waliullah cannotbring himself to prescribethe complete,unconditional eradicationof the evil. In what is surely a very tame end to his argument,he decides to leave to the shari', or the law-enforcingauthority,the freedom to choose whetherusuryand gamblingshouldbe forbiddenaltogether, "limitsshould or be set within which they may be permitted".'20
115 Cf. J. Schacht in Encyclopaedia of Islam, first ed., s.v. ribd; also his Origins of MuhammadanJurisprudence(Oxford, 1950), p. 251. 116 Cf. R. Levy, Social Structure of Islam (Cambridge, 1957), p. 256. 117 Matlacu-lAnwar (Aligarh), p. 174. 118 Tiarlkh-i Firuz-shahl, Bib. Ind., p. 343. 119 Fatawa-i Jahanddrl,tr. M. Habib and Afsar Begam as The Political Theory of the Delhi Sultanate, pp. 34-38. 120 Iujjatullah il-Baligha, Arabic text with Urdu translation of 'Abdu-l Haq Ijaqqani

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IRFAN HABIB

Of great interest is the position of usury in the moral conceptions of the popular religious teachers of the 15th and 16th centuries, represented by Kabir, Nanak and others. The teachings of these men were derived in part from conventional Hinduism and Islam and were, in still larger part, directed against both. Their beliefs were simple: an unalloyed monotheism, a rejection of all ritual, an assertion of the spiritual unity of man, and a denial, therefore, of the caste system. The teachers addressed themselves to the masses, using the non-literary popular dialects of the time. Many of them came from 'he class of artisans and from other low, even menial, castes.121 many ways In one would expect them to have mirrored the feelings of the poor. Kabir, the most prominent of these teachers, was a weaver. His verses give us, in the form of allegories, a haunting picture of the misery of the medieval poor.122There are wails of complaint against the oppressive shiqqdar, collector of land-revenue, and jagatis, collectors of tolls.123But there is never a hostile reference to the usurer. On the contrary, Kabir seems to regard the usurer's claim on his debtor as so natural that he does not hesitate to justify God's claim on man on the ground that God is a usurer who has lent man his life: Kabir, the capital (punji) belongs to the Sah; and you waste it all; There will be great difficulty (for you) at the time you have to give your account.124 It is therefore probably not accidental that the Principles or Commandments accepted today among Kabir's followers do not contain a prohibition of
usury.125

In Sikhism, the religion of the Panjab peasantry founded by Nanak,126we find evidence of the same attitude towards usury. An exact parallel to Kabir's acceptance of the usurer's claim on the debtor as being based on natural justice and so analogous to God's on man, is found in the following verses of Arjan, the fifth Guru of Sikhism:

(in parallel columns), ed. Muhammad Latif & MiCraj Muhammad (Karachi, n.d.), Vol. II, pp. 310, 317-18.
121

The most authentic verses of Kabir are preserved in the Gura Granth Sahib, the Sikh scripturecompiled in 1604, and in a MS of the 17th or 18th century (not the 16th, as its editor believed), edited by Shyamsundardas under the title, Kabir Granthavali,Nagari PrachariniSabha, Kashi, Vik. S. 2008. Numerous other compilations, ascribed to Kabir, including his Bijak, appear to be later fabrications. 123 Guru Granth Sahib, Nagari text, II, pp. 793, 1194-5. 124 Kabir Granthavali, p. 42. 125 Cf. Rev. Ahmad Shah, The Bijak of Kabir (translated into English) (Hamirpur, 1917), pp. 44-45. 126 For the peasant character of the Sikh community, see my Agrarian System of

122

Cf. my Agrarian Systemof MughalIndia,p. 333.

MughalIndia,pp. 344-45.

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The Sahu gives countless (capital) of his own to man; (Man) eats, drinks and uses it with pleasureand joy. (But) when the Sahu takes back some of the amount He has entrustedhim with (aman), The fool becomes angry.127

of Similarly,usury is not forbiddenin the scripture the Satnamicommunity, which is otherwisefull of scorn and contempttowardswealth, and contains many exhortationsagainst theft, fraud, begging, harassmentof the poor,
etc.128

This tolerant attitudetowardsusury in what we may well designatethe Poor Man's Religion of medieval India is of no little significancefor our study of its prevalencein the society of the time. If those who addressed themselvesto the poor could assumethat to their hearersusury was one of the most naturalof institutions,we must believe that the everydaylife of the masses had been deeply permeatedwith it. And only when a very large numberof peasantsdependedon the usurerfor their seed and cattle, and a large numberof artisansfor their raw material,could usuryhave been evil, but as a necessaryelement regardedby the poor not as a superfluous in the whole productiveprocess by which they lived.
IRFAN HABIB

Aligarh Muslim University,India

Gura Granth Sahib, Nagari text, I, p. 268. The Satnami sect arose in the 17th century. Its members were generally peasants, lowly artisans and petty traders. See my Agrarian System of Mughal India, pp. 343-44. The Satnami scripture is contained in Pothl Gyan Banl Sadh Satnamt, Library of the Royal Asiatic Society, London, Hindustani MSS, No. 1.
127 128

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