PART TWO
BUSINESS

4
The Colonial Expansion

Overview

The present chapter describes the range and scope of Nakarattar commerce in the nineteenth and twentieth centuries. Special attention is paid to the Nakarattar response to changes in their economic and political environment, particularly their aggressive uses of finance capital and their skillful manipulation of the emerging colonial institutions of commerce and government. The resulting model of Nakarattar colonial adaptation provides a macrocontext for the detailed structural studies of Nakarattar commercial, political, religious, and kinship institutions presented in Chapters 6 through 10. Those chapters, in turn, describe the mechanisms by which Nakarattars achieved the dramatic expansion described immediately below.

Nakarattar commercial evolution during this period can be broken down into three overlapping phases. The first begins in the precolonial and undocumented past and extends to the middle of the nineteenth century. This period marks their expansion from a localized salt-trading caste to a broad-ranging merchant-banking caste. Their commercial activities may have continued to involve the salt trade during this time (although documentation of this involvement is rather circumstantial), but they were also clearly and massively involved in the rice, cotton, and credit markets within the Madras Presidency and between Madras, Ceylon, and Bengal.

The second phase of Nakarattar expansion has its roots in the first half of the nineteenth century, but cannot truly be said to have started until the 1860s and 1870s. In the early nineteenth-century prelude to this phase, Nakarattars seem to have followed the footsteps of the British army as it conquered and pacified Burma and Malaya. Published caste histories (e.g.,

Ramanathan Chettiar 1953: 27) place Nakarattars at various ports of Southeast Asia by the following dates: Singapore and Penang, 1825; Moulmein, 1852; Rangoon, 1854; Mandalay, 1855. The Nakarattar firms established in these outposts were branches of agencies already established in Calcutta (Lakshmanan Chettiar 1954) and had probably positioned themselves so as to oversee the provisioning and financing of British military operations. Although it is unlikely that trade to these Southeast Asian outposts played any significant role in the overall scheme of Nakarattar commerce, it did set the stage for their rapid expansion from that point.

In the second half of the nineteenth century, four historical trends coincided and opened up new commercial opportunities ideally suited for Nakarattar banking operations:

Nakarattars responded to all of these changes in their commercial environment by loaning a greater proportion of their investment capital directly to agriculturalists, plantation owners, and mine operators throughout Southeast Asia. In this capacity they made a unique and central contribution to the growth of the plantation economy in Ceylon, the emergence of the Burmese rice market, and the development of Malaya's rubber and tin industries.

The third phase of Nakarattar commercial evolution was one of contraction rather than expansion. Starting in the 1920s and increasingly through the first half of the twentieth century, the business environment of British India was altered in crucial ways by the development of nation-

alistic movements in Southeast Asian countries, by the general growth of legislation restricting indigenous forms of banking, and by increased industrial opportunities within India for non-British businessmen. The consequences were significant for the Nakarattars. Their caste organization began to unravel in the face of multigovernmental interference with traditional banking practice. Elite members of the Nakarattar caste began a gradual transfer and freezing of investment capital by shifting from mercantile to industrial ventures. Nonelite Nakarattars—perhaps 80 to 90 percent of the caste—were forced to scramble for new employment opportunities and often began working as employees in government and business offices, although many of these were owned or managed by Nakarattars. The present study, however, stops short of examining this third phase, focusing its attention instead on processes leading up to and culminating in the unfolding of the Nakarattar commercial system at its peak, during the colonial period from 1870 to 1930.

Seventeenth-Century South India

In the sixteenth and seventeenth centuries, the Vijayanagar empire disintegrated after four centuries of rule. In the far south, conflict over the spoils between Bijapur and the Marathas, complicated by the most southward efforts at Mughal expansion, stimulated conflict between the kingdoms of Madurai and Tanjavur. The European trading companies arrived, and governmental centralization declined in the face of widespread civil wars (Arasaratnam 1986; Ludden 1985; Rajayyan 1974; Sathyanatha Aiyar 1924; Stein 1969, 1980). Yet the fortunes of South Indian trade apparently followed an independent course.^[1] For some mercantile groups and especially for the Nakarattars, trade flourished during this period. In fact, growth in key sectors of South India's commercial activities may have contributed to the Vijayanagar empire's decline. European guns and artillery made war less expensive. Local chiefs, called palaiyakkarars (or, in British usage, "poligars") could more easily afford relatively small but effective armies. The resulting declarations of independence created numerous "little kingdoms" ruled over by a varied assortment of chiefs, rajas, palaiyakkarars, setupatis, tondaimans , and others. Many of these local "warrior chiefs" demanded recognition as rulers on a par with their nominal suzerain, the Nayak of Madurai, who was the Vijayanagar deputy in charge of the entire southern region.^[2]

Military escalation continued into the eighteenth century and increased the overall demand for money and credit in order to pay for armies and guns (Rajayan 1964–65; Raman Rao 1958; Sundaram 1944–45). A large part of this demand was met by revenues from an expanding

export trade with Europe and the East, coupled with significant increases in New World bullion supplied by European trading companies (Habib and Raychaudhuri 1982). But cash by itself was not sufficient. Seasonal fluctuations in production and sales, variable weather, unpredictable foreign markets, and a generally complex and uncertain economic climate all conspired to generate an enormously credit-hungry society. The myriad chiefs and "little kings" as well as the European trading companies, agriculturalists, and artisans all depended on forward advances of credit from Indian merchants and moneylenders.

The Nakarattar caste adapted to their political and economic environment in a modest fashion, at least during the seventeenth century. Their own oral traditions suggest that they were primarily employed as salt traders within a small area of ninety-six villages in the northern part of present-day Ramanathapuram. District (see Map 4). Unfortunately, European records do not provide a full description of South India's salt industry during this time and do not, in fact, mention Nakarattars as salt traders either in the seventeenth or the eighteenth century. In the eighteenth century, the records suggest that salt in various forms was produced in coastal regions of southern India and traded for inland consumption in exchange for items such as wheat, cotton, rice, dry grain, tamarind, cumin seeds, and long peppers.^[3] They identify castes other than Nakarattars (especially Telugu Komati and Baliga Chettis) as being involved in the coastal and international trade. Typically, kings and European companies rented coastal salt "farms" under their control to important merchants and dubashes , who then had salt transported by Muslim traders on cattle back to inland customers.^[4]

It seems reasonable to assume that a similar state of affairs existed during the seventeenth century, and that during this earlier period Muslim traders were the source of salt for small-scale Nakarattar traders.^[5] It is also possible, however, that Nakarattar trading activities extended east from their home villages as far as the Palk salt swamps and that they obtained their salt directly from salt producers or salt-bed renters. Whatever the case, it is impossible to say in what commodities besides salt Nakarattar trade was carried out or to identify the full range of Nakarattar trading territory. It does seem clear that the total scope of Nakarattar trade was only a shadow of what it was to become. Certainly, their subsequent history proves that their itinerant salt-trading activities and the social organization that supported these activities had prepared the Nakarattars to take advantage of the changing commercial environment of South India.

In the eighteenth century, the primary Nakarattar occupation—inland salt trading—became dramatically less profitable. In 1792, a widespread drought and famine reduced or halted trade between inland salt-

consuming and coastal salt-producing regions of the Madras Presidency. According to Krishna Rao (1964), this interruption in normal salt-trading activities marked a watershed in the history of the Madras salt industry. According to Rao's interpretation, the drought so weakened the power of major salt renters that, in 1805, the East India Company was able to eliminate them as middlemen in the salt trade and assume monopolistic control over salt production (see below). This may be something of an exaggeration, since the East India Company promptly turned around and rented out salt beds to the highest bidder. But the ultimate effect of these various events was that the price of salt to salt traders more than doubled from that before 1805.^[6]

Cotton, Pearls, Rice, and Salt, 1800–1850

The Nakarattar caste responded to the hostile "push" of salt trade disruption and East India Company pricing policies as well as to the lucrative "pull" of opportunities for money lending. In a process that is still unclear, Nakarattars developed a sophisticated financial apparatus which included provisions for making forward loans to agrarian producers, for extending short-term and long-term loans to political and military leaders, and for transmitting hundis or teeps (bills of exchange) among themselves and their clients. Along the way, Nakarattars evolved from a geographically restricted community of salt traders to a powerful, long-distance merchant-banking caste. Details of this process are hard to come by. Historical records of Nakarattar business activities only really begin in the later part of the nineteenth century. But such information as is available provides a marked contrast with the picture of localized salt trading portrayed in traditional written and oral accounts of pre-European Nakarattar history (see Chapter 7).

Nakarattar oral traditions, chronicled in a caste history written by A. V. Ramanathan Chettiar (1953), provide some indication of the territory and the commodities in which Nakarattars were chiefly involved. According to Ramanathan Chettiar, Nakarattars were important actors in the grain and cotton trade in towns that, judging from their geographic distribution, were strategically located in the central productive regions of both these commodities. One set of towns formed a north-south string in Tirunelveli that still comprises major trading towns of the region today, providing markets for cotton and other cash crops produced in their hinterlands. Another set formed a double string of towns in Tanjavur—one strand located along the coast, the other roughly thirty miles inland. This double string served a similar function for rice produced in Tanjavur as the single string of cotton trading towns in Tirunelveli. Note that fifteen miles is the approximate median distance between coastal and inland Nakarattar

trading towns in Tanjavur and that this distance constitutes about one day's round trip journey carrying goods by bullock.

Besides information about the location and commodities in which Nakarattars were trading, Ramanathan Chettiar (1953) also provides information suggesting that religious and other forms of gifting provided a continuing mechanism by which cooperating groups of Nakarattar traders gained entrance into local communities (see Chapter 7 for description of the role of religious gifting and entrance to the seventeenth-century temple town of Palani).

Until 1815, all those who were engaged in cotton business left their homes and met at the house of Arjuna Perumal Ambalakarar at Narasingampatti (5 miles west of Melur and 13 miles east of Madurai) and from there they started as a group to various cotton centres. At the end of the trading season, they returned to the said Narasingampatti from where they branched off to return home. Deeds of Palmayrah leaves have been found in the said Ambalakar's residence. According to one of those deeds, the profit of 743 and 1/2 varahans accrued in one partnership was spent to dig a drinking water tank in Narasingampatti. From revenue records kept in Melur Taluk office, it is known that the tank is called Nagarattar Orani or Panchuppotti Orani ["the tank built out of profits in cotton bale transactions "].^[7]

Nakarattar commercial activities extended even beyond the Tamil mainland. By the end of the eighteenth century, they had gained control of pearl fisheries in the Ceylon Straits and the Gulf of Mannar, usurping this position from Muslim Maryakarar merchants who had previously been granted control of the fisheries by the Setupati (Raja) of Ramnad in the seventeenth century (Arasaratnam 1971a; Samaraweera 1972). Various factors seem to have been in play. For one thing, the setupati's influence in granting fishery rights had become considerably eroded. As early as the eighteenth century, administrative rights over the fishery were being strongly contested by the Dutch, by the Raja of Tanjavur, and by the Nawab of the Carnatic. The different claims of these parties were apparently withdrawn only in return for a financial settlement from the Nakarattars (Arasaratnam 1979; Samaraweera 1972). In addition, the Nakarattar takeover may reflect a close financial relationship that Nakarattars built with the setupati who was, perhaps, their largest client zamindar (see below). That is, Nakarattar merchants may have been in a position to influence the setupati to exercise whatever powers he still retained over the straits. In any case, the Nakarattars were ultimately able to exercise monopoly control over the fisheries until 1836, renting them out to Maravar and Paravar boating crews from Tuticorin.^[8]

Figure 1.
Simple hundi exchange system

From at least 1820,^[9] Nakarattars also dominated the major coastal trade in arrack and other coconut products from Ceylon to Madras, in rice and cloth from Madras to Ceylon and, arguably, in salt from Madras to Calcutta and rice from Calcutta to Madras and Ceylon. It is difficult to gauge the degree of their domination, but according to contemporary observers, they had cornered the Ceylon rice market, controlling all imports not only of Tanjavur rice but of Bengal rice as well.^[10]

The Nakarattars' position in the Ceylonese rice market allowed them to take advantage of a marked imbalance of trade strongly tilted in favor of rice exports from Madras to Ceylon. Ceylonese importers made up differences in the trade balance with British sterling, which was earned by trading in the European market for Ceylon cinnamon, spices, coconut products, and increasingly—until the coffee blight appeared in 1868—coffee (MacKenzie 1954: 90). But Nakarattar agents in Colombo—holding a monopoly on the import of rice—were unwilling to accept sterling as payment unless there were exceptional sterling shortages in India. Accordingly, Ceylonese rice traders appointed their own agents in Madras to whom they sent their sterling bills for sale. They then sold rupee drafts on those agents to the Nakarattar bankers in Ceylon, who discounted (i.e., cashed) the hundi in rupees or rupee credit at a standardized discount rate. The Nakarattar bankers, in turn, sent the hundis to Madras where they could be redeemed at face value (see Figure 1). British merchants and plantation owners in Ceylon met their rupee needs in a similar fashion. The Nakarattars "were thus in a position practically to hold the Colombo merchants [Ceylonese and British] to ransom, while the latter were at the same time dependent on the sterling exchange in India."^[11]

Reports of Nakarattars trading Bengali rice in Ceylon are also interesting in that they lend support to present-day oral traditions describing the northward expansion of Nakarattar trade and the establishment of Nakarattar firms in Calcutta as early as 1820 (Lakshmanan Chettiar 1954: 41). They are intriguing in view of family histories that describe the involvement of early nineteenth-century Nakarattars in salt farming for trade to Ceylon and other places.^[12] I also note the existence of considerable documentation of the trade in grains from Bengal for salt from Madras, attested in East India Company records for the eighteenth and nineteenth centuries.^[13] All of these scattered reports bear further research. But they are consistent both with traditions of Nakarattar salt trading and with a general Nakarattar shift away from small-scale trading activities and into the large-scale financing or ownership of productive resources throughout the Madras Presidency.

There remains scope for considerable research into the precise nature of Nakarattar credit networks and of the various commodities markets with which they were involved. Whatever findings eventually result from such research, it is clear that late eighteenth-and early nineteenth-century Nakarattar commodities trading was tied to some kind of exchange banking system. That is, Nakarattars combined their trade transactions with purely financial transactions such as money lending, the remittance of funds between geographically distant locations, and even quasi-governmental treasury functions to the extent that governing authorities made use of Nakarattar financial facilities. Like any other system of credit extension and financial intermediation, the system worked ultimately because of the mutual confidence (strongly qualified by the lack of any viable alternative) between Nakarattars and their clients. During the colonial period, for reasons that will be explored in subsequent chapters, the Nakarattar system worked more successfully than did most of its competitors. Overall, the record of Nakarattar enterprise remains extremely sketchy throughout the early nineteenth century, both in Ceylon and in Madras (and even more so in Calcutta). Yet, such as it is, the evidence suggests that by 1850 the Nakarattar had already enlarged their economic niche from domestic trade to international trade and had become a major force in the commercial world of Southeast Asia.

Peshkash, Money Lending, and Repayment, 1800–1850

Nakarattar commodities trading was inextricably linked to money lending and banking. East India Company documents indicate that before the end of the eighteenth century, Indian soukars (moneylenders) within the

Madras Presidency—including soukars in Madura district, which encompassed the Nakarattar homeland—acted as brokers and renters for palaiyakkarars (poligars) with superior land rights, transferring funds between different palaiyakkarars as well as between the palaiyakkarars and anyone else with whom the palaiyakkarars transacted: army troops, merchants, agrarian producers, and European trading companies.^[14] According to a British revenue officer in 1793, "Most of the Soukars of the Southern Provinces have open accounts with the Poligars and are in the habit of frequent dealings with them. For management of their concerns they have Gomastas [clerk-accountants], etc. established in the Pallams ["army camps"] to wait on the spot to receive the produce of the different crops that are assigned to liquidation of their demands."^[15]

After the "Poligar Wars" of 1799–1800 and the establishment of British rule in 1801, the surviving palaiyakkarars were largely converted into British renters and—following the Bengali practice—were called zamindars . But the change of name and the cessation of violence did little to alter the revenue needs of these palaiyakkarars -turned-zamindars . On the contrary, the period from 1800 to 1850 is widely regarded as one of British overassessment and overcollection of land rents or taxes, called peshkash (Saruda Raju 1941; Stein 1969), and zamindars continued to look to local soukars as financial intermediaries, subrenters, and brokers for agrarian commodities produced on their lands.^[16] In 1828, the Madura District subcollector reported, "It was formerly the custom to deliver over the ... grain to a few rich merchants who of course made a considerable profit by the assistance they afforded the Zamindars in relieving them from the burden of disposing it on the market."^[17] These practices did not die out, the subcollector's allusion to "former custom" notwithstanding. The Miscellaneous Correspondence volumes for Madura District during the 1850s list drafts drawn by Nakarattar grain contractors in Ramnad and Sivagangai—names that are identical with zamindari creditors.^[18]

Faced by ever-mounting expenses and tributary obligations to the East India Company, zamindars relied as never before on large-scale loans from any available source of financial credit.^[19] To secure these loans, they frequently leased their income-earning villages to Nakarattar creditors, assigning the revenue of villages or sometimes entire districts as security against a loan.^[20] Pleading inability to pay out of their own resources, zamindars would then have their Nakarattar and other creditors pay their peshkash dues to the appropriate authority in the form of hundis or teeps (bills of exchange). Company officials often had little choice but to accept this payment and hope for the eventual cashing of these bills—

often netting as little as one-fifth of the amount listed in their books as their rightful revenue tribute (Sundaram 1944–45: 13–14).

Such procedures solved the zamindars ' immediate cash-flow problems. But at the same time it increased their difficulties in subsequent years since, whatever original understanding had been reached with their creditors—and, needless to say, the system was rife with opportunities for fraud—the leased land never seemed to produce an income sufficient to pay off the principal plus the interest on the original loan. In addition, the zamindar was still faced with peshkash demands on his entire estate, but much of the estate's produce now went to its moneylender lessees. Perhaps the most insidious effect, however, at least from the zamindars ' point of view, was the consequences of this technique for the East India Company's policies regarding revenue collection. Ultimately, the Company—and, after 1856, the colonial government—erected a British-based legal system as the basis for deciding and enforcing decisions on all revenue and most civil disputes. In the process, zamindars lost their independent jural, administrative, and military-police powers, while moneylenders, including Nakarattar moneylenders, gained considerable leverage through the exercise of legal suits in the court system.

In a study of the traditional kings and zamindars of South India, Pamela Price (1979) describes the banker-client relationships between some of the most prominent Nakarattars and zamindars in nineteenth-century Madras. She argues that, during the early decades of this period, Nakarattar loans generally were not repaid directly; rather, "payment could come in the form of lightened taxes, of trading and minting rights, and in the intimidation of robbers" (1979: 192). In other words, money lending to zamindars was an integral part of other commercial operations. It was the price one had to pay in order to play a successful, large-scale role in agrarian trade.

Despite this well-taken argument about the indirect benefits of zamindar financing, there has been only one systematic study (unavailable to me) of the financial relationships between zamindars and bankers during this period (actually a study of the Nawab of Arcot: Gurney 1968). Accordingly, I make the cautionary observation that the sums of money involved could be quite substantial. It seems unlikely that Nakarattars would forgo repayment—even for significant indirect benefits—if there was some way to avoid the loss, and there are good reasons to believe that they did not. One finds references, for example, to direct techniques of moneylender repayment by zamindars in the practice of land leasing described above. In other ways, too, Nakarattar moneylenders demonstrated their unabated appetite for direct repayment of loans. For example,

a letter from the Madurai Collector, R. Peter, to the Accountant General in Fort St. George mentions the involvement of one Veerappa Chetty and another unnamed Nakarattar with the Zamindar of Sivaganga. The details of the transactions—especially the rights of the different parties in the case—are ambiguous. But the interest of the Nakarattars in recovering their money is plain.

To: Accountant General,
Fort St. George.

Sir,

In reply to your letter of the 3rd—Ultimo ... I have the honor to state that on 28th May the late Zamindar of Shevaganga with Veerapah Chetty came in my presence. The latter stated that he would pay me 40,000 thousand [sic ] rupees of the Sheevaganga balance, of which he said he would pay 9,000 rupees in Hoondies [hundis ] of the Accountant General. I desired him to do so and the next day he proceeded to Ramnad. A Takeed [administrative order, memorandum] was prepared in the Cutcherry [district headquarters] dated 3rd June directing the Hoondies to be received and on the 2nd July I received a note from the cash keeper stating that the Chettiyar had not yet come to the Hoozoor to affix their signature to the bills. I therefore ordered him to carry the Bills to the account of the Shevagunga balance as they were—The Chetties came to me at Sovarencourchi on the [?] of July and signed a paper corroborating the Will in favor of the present Zamindar and then made no opposition to the Bills in the Zamindar's favor. They also advanced no claim to the Bills on the 11th September when other Chetties came forward to adjust the remaining balance, but on the 29th September when the Zamindar closed with the other Chetties they gave an arzee [petition] claiming the 9,000 rupees as they had not receipted the bills—On the 30th, this was referred to the Zamindar who on the 21st November objected to the payment of the 90,000 [sic ] rupees which they claimed as the said Chetties were in debt to the Zemindary and he insisted first of all that their accounts should be adjusted.

The payment of the Bills was entered in the names of the persons in whose favor they were drawn [the names of Veerapah and Sateeapah Chetty are noted in the margin]—and the amount has been credited to the permanent Peshcash of fusly 1230 in the accounts of July 1020 under the land revenue.

Madura 2d, June 1830 .^[21]

In fairness to Price, her characterization of the rewards of zamindar financing is applied explicitly to the early parts of the nineteenth century, before a progressive weakening of zamindars and the erection of a British-based legal system made litigation an attractive course of action for Nakarattar creditors. Price is quite aware of these shifts and discusses them in her dissertation. My concern here is simply to point out that the contrast between early and late nineteenth-century relationships between moneylenders and zamindars lies less in the difference between indirect and direct rewards for zamindar financing than in the legal powers available to Nakarattars to enforce the terms of loan agreements. There remains considerable research to be done on the remedies and sanctions available to moneylenders in their pre-European and early nineteenth-century dealings with zamindars .

Litigation and the Emergence of Nakarattar Zamindars , 1850–1900

As the world economy changed and Crown government replaced Company rule, Nakarattar investments typical of late eighteenth-and early nineteenth-century Madras became increasingly risky or unprofitable. The East India Company restricted and, in the end, all but abolished a system of government loans to agriculturalists (takkavi loans) that had secured many credit transactions during the first half of the century (Sarada Raju 1941: 142–145). Simultaneously, land also became more risky as collateral (albeit potentially more profitable; see below). It was seldom alienable in an unrestricted fashion, and "landowning" peasants generally did not own any land outright. Instead, they possessed a legally ambiguous and hence conflict-generating share in their joint-family estate. Under changes in the evolving legal system, the time required to settle legal disputes over ownership and enforce a mortgage foreclosure lengthened. Thus, only local residents, who had extralegal sanctions available to them, could safely accept land as security.^[22] In Tirunelveli, the cotton trade was becoming increasingly competitive as Nadar traders developed an edge through their connection with Nadar cotton cultivators (Hardgrave 1969)—an edge not duplicable by the more highly specialized Nakarattars. Meanwhile, for reasons that are not clear, Marwaris came to dominate the credit needs of cotton traders in Coimbatore.^[23] All opportunities for Indian participation in shipping were outlawed by the colonial government; at the same time, Europeans were moving to develop and monopolize new arenas of investment: notably, railroads, military supplies, and sugar (Bagchi 1972; Habib and Raychaudhuri 1982; Mahadevan 1976; Ray 1979). Finally, beginning in 1843 with the founding of the Presidency Bank of Madras, Europeans

established their own exchange banks, thereby excluding Nakarattars and other indigenous moneylenders from the market in mercantile finance and currency exchange for private European firms and the market for quasi-governmental treasury functions for the East India Company.^[24]

These dramatic changes in opportunities for investment had major ramifications for Nakarattar business practice. In the Madras Presidency itself, they ruled out virtually every area of investment. As a consequence, almost the only possibility for profitable investment remaining was, ironically, to invest in or convert bad debts into land ownership. The irony lies in a reversal of the agricultural commodities market in Madras. The agricultural depression that had contributed to the credit hunger of the first half of the nineteenth century at last began to relinquish its hold on the South Indian economy. Between 1823 and 1853 the value of good, wet land in Tanjavur District had risen from Rs. 12 to Rs. 39 per acre. Then between 1853 and 1868 it rose dramatically, to Rs. 151 per acre (Raghavaiyangar 1892, cited in Mahadevan 1976: 44). Between 1878 and 1903 the value of land throughout Madras rose from Rs. 245 per acre to Rs. 458 per acre (Kumar 1965: 142). Moreover, this rise in land value was fueled and surpassed by rises in the prices of grain. According to David Washbrook, for example, prices of dry grains between 1880–87 and 1918–20 rose between 50 percent and 70 percent, and went even higher during the shortages of 1918–20.^[25] Meanwhile, Fort St. George raised its tax assessments on dry land only from 7 percent to 12 percent (Washbrook 1973: 158).

It is not clear that these rising prices increased the profitability of investment in land and agriculture to the extent that they compensated for investment opportunities foreclosed by British interests. Moreover, as noted above, serious legal obstacles often lay in the path of anyone seeking to wrest a clear title away from members of a landowning joint family. Nevertheless, land was sufficiently attractive so that wealthy Nakarattar families, with sufficient economic leverage over their zamindar clients, used this leverage, along with extensive litigation, to acquire considerable lands.

One of the most notable cases is described by Pamela Price (1979). In her account, the story begins with a transaction in which the Setupati of Ramnad leased twenty-four villages in the vicinity of Devakottai to a Devakottai Nakarattar named Al. Arunachalam. The date on which this lease occurred is not clear. But from at least the 1860s on, these villages were not to escape control of Arunachalam's family until the Zamindari Abolition Act of 1947.^[26]

The loans that secured these leases for Arunachalam—or, more accurately, the loans for which these leases stood as security—were not suffi-

cient to solve the setupati 's long-term financial problems. During the 1860s and 1870s, he found it necessary to mortgage additional villages, almost on a wholesale basis, to Arunachalam's family and to two other Nakarattar families as well.^[27] Other, unspecified portions of Ramnad were leased to Arunachalam's son, Ramasami, and to his nephew, Pethuperumal. Two additional villages went to two brothers from a separate lineage, Chidambaram and Subramaniam. The villages from an entire two and a quarter "divisions" (taluks ?) were leased to their father's brother Ramanadhan. And another three divisions went to two cousins from a third lineage, Me. Ar. Narayan and Me. Ct. Vairavan.^[28]

In the 1870s the setupati was unable to meet the interest payments on loans obtained from these three families, even after the income from their leased lands was taken into account, and the entire gang of Nakarattar creditors took him to court. According to Price, only his early death saved the zamin from being completely divided. Instead, it was placed in the hands of a court-appointed manager until his son Baskara reached his majority in 1889. It is not clear how the Court of Wards satisfied the Nakarattars. But whatever solution was reached, it was only temporary. In the 1880s, Baskara's mother borrowed Rs. 80,000 from Ramasami to arrange a second and secret wedding for Baskara.^[29] In 1889, Baskara assumed the title of setupati . His estate was solvent, with a revenue of Rs. 900,000 and a cash balance, at that time, of Rs. 300,000. Three days after his "rendition," Baskara gave or leased two additional "mahanams " (divisions of land: mahanadus ) containing twenty-four villages to Ramasami. It is not clear what he received in return. Ten weeks later, L. Ar. Rm. Ramanadhan (by his initials, a different Ramanadhan Chettiar than the previously mentioned Nakarattar) induced Baskara's younger brother to sue for partition of the zamin and extended Rs. 127,000 to cover legal costs. Ultimately, the court ruled that Ramnad, as a traditional kingdom, had a special status and was not subject to division under laws concerning the Hindu joint family. However, Baskara was forced to pay his younger brother an allowance of Rs. 2,000 per month plus a lump sum payment of Rs. 250,000 to cover back allowance.

Price describes many different kinds of expenses incurred by the young setupati . But for our purposes, it is perhaps enough to note that by 1890 Baskara had borrowed Rs. 486,000 from Ramasami. In 1891, in return for a lease on most of Hanamanthagudy Taluk, he borrowed Rs. 800,000 from V.A.R.V. Arunachalam and S. Rm. M. Rm. Muthia (grandfather of Raja Sir Annamalai Chettiar). In the same year, he also borrowed an additional Rs. 750,000 from the British-owned Commercial and Land Bank of Madurai. By 1892, Ramasami, still Baskara's chief

creditor, had permanent or term leases on 255 villages (at one time he had held title to 500, and his relatives to another 80). In 1893 Baskara's total deficits were Rs. 763,000. By 1894, he owed Ramasami alone Rs. 837,035, against which Ramasami secured a mortgage deed on the entire zamin of Ramnad. In that same year, Ramasami's lease to 24 villages near Devakottai was made permanent. By July of 1895, Baskara had given his various creditors 306 villages on permanent leases and 294 villages on term leases. The villages still paying revenues to Baskara's estate had diminished from 1,011 to 439. His total debt was estimated at Rs. 2 million. In 1896 Al. Ar. Ramasami was officially installed as the Zamindar of Devakottai with a domain fissioned out of Ramnad consisting of the 24 Devakottai villages and containing forty thousand acres of wet land and sixty thousand acres of dry land.^[30] In 1901, Baskara was removed from the managership of Ramnad and replaced by Ramasami. In 1903, Baskara died at the age of thirty-five.

The case of the Setupati of Ramnad and the Zamindar of Devakottai illustrates events that occurred many times and with many different zamindars and Nakarattar creditors. It was unusual in its scale and in that only one other Nakarattar besides Al. Ar. Ramasami ever had the title zamindar conferred on him by the British, namely, S. Rm. M. Chidambaram, Zamindar of Andipatti.^[31] But several other Nakarattars acquired permanent leases or foreclosed on mortgages secured by zamins and assumed the title (see Table 1). In addition, other Nakarattars acquired similar, but generally smaller, inam holdings. My informants estimate that perhaps two hundred Nakarattars in all were able to obtain such minor titles.

Nakarattar Commercial Expansion in Southeast Asia, 1870–1930

In spite of such elite Nakarattar land acquisition, the number of Nakarattar families attaining land titles remained a very small proportion of their total numbers. Taking an 1890s estimate of the population as approximately ten thousand people,^[32] these two hundred relatively large-scale, landholding Nakarattars could have represented at most one-fifth and more likely represented one-tenth or even one-twentieth of the joint-family units (valavus ) whose heads might have sought to receive title.^[33] Moreover, many of the zamins were actually quite unproductive and, according to a Nakarattar caste historian, were acquired as speculative investments in the hope that the government would eventually irrigate the land or build an adjacent rail line.^[34] For the majority of Nakarattars, then, and for elite Nakarattars who were not satisfied with the acquisition

of land and titles in Madras, the constricting climate for financial investment in India must have been a considerable stimulus to search for new ways of putting their money to use.

Their opportunity came with the growth of the plantation economy in Ceylon, the emergence of the Burmese rice market, and the development of Malaya's rubber and tin industries. From the mid-nineteenth century onward, British banks largely monopolized the servicing of British credit needs in these countries, and with a few notable exceptions they remained aloof from servicing the credit needs of the non-British. Unlike in Madras, however, the provincial governments of Southeast Asia adopted policies that initially encouraged rather than restricted investment by Nakarattar moneylenders. Displaced from the credit markets of Madras, and displaced from British investment and exchange markets throughout greater British India, the Nakarattars found a new niche in servicing the credit needs of the indigenous Southeast Asians and migrant Indians who fought with each other and with the British in a race to produce agrarian commodities for the European export market. Nakarattars were not the sole source of credit. Particularly in mainland Southeast Asia, they faced competition from the Chinese, who also maintained a formidable network of money-lenders. But the Nakarattars were in a particularly advantageous position. In addition to their own financial and organizational resources, Nakarattars—especially elite Nakarattars—retained ties to British banks and firms and used these ties as a further and substantial source of investment capital. In many ways, this practice merely represented a continuation of practices established during the eighteenth and early nineteenth centuries in Madras and Ceylon. In expanding this general role of financial intermediary, however, they effectively excluded any competing group from the specific niche of intermediary between the British and indigenous Southeast Asians within the overall financial system of British India.

It is difficult to arrive at a reliable quantitative estimate for the scale of Nakarattar commerce during the late colonial period. The earliest figure offered by a knowledgeable source suggests that, in 1896, their total assets amounted to Rs. 100 million (Sundara Iyer 1906, cited in Pillai 1930: 1174), but it is not clear how this estimate was formed. The difficulties in ascertaining any accurate estimate of Nakarattar finances are reflected by the multiple and inconsistent estimates of their assets, ranging from Rs. 536 million to Rs. 1.3 billion, contained in the 1930 reports of the Provincial Banking Enquiry Committees of Madras and Burma and the 1934 report of the Ceylon Banking Enquiry Committee. In the depressed economic environment of that time and in the atmosphere of emergent nationalism and populist politics that characterized public debate in the

1930s, most of the evidence obtained in a public "enquiry" on any topic was highly biased and prejudicial. Enquiries into money lending and banking, agricultural indebtedness, and commercial or industrial finance were no exception. On one hand, the vast majority of relevant testimony was collected from Nakarattar debtors, who painted a predictably black picture of their creditors. On the other hand, testimony by Nakarattar bankers can hardly be accepted as an unbiased alternative. Such as it is, however, Nakarattar evidence provides the only picture we have of the extent of Nakarattar business operations. I present sample estimates of Nakarattar working capital and assets in Tables 2 and 3.

Of the various estimates of Chettiar capital, those provided by A. Savaranatha Pillai (1930) are particularly interesting in view of the qualifications that he attaches to them. Pillai was the Assistant Commissioner for Income Tax for Madras. His figures were prepared from tax returns compiled by tax officers for "circles" in which Nakarattars had their principal place of business.^[35] As a consequence, they are unlikely to reflect any additional bias beyond the distortions built into procedures for recording Nakarattar income.

Pillai describes the kinds of distortions these figures are likely to represent. First, the information they contain is derived from faulty self-reporting of Nakarattar assets in Madras. Pillai notes that Nakarattars frequently underreported their earnings, showing accounts for selected branches of their firms rather than total earnings. Moreover, many Nakarattar firms (including all of the largest firms, according to one informant) maintained their legal headquarters in the principality of Pudukottai—a tax-exempt, "princely state"—and did not report their assets and earnings at all. Secondly, Nakarattars did not report all of their business capital, even inaccurately. By Pillai's estimate, they left out the capital of at least 1,600 Nakarattars whose principal business was located in Burma, and of 193 Nakarattars whose business lay in Madras but outside the areas reported in those tax returns on which his account was based (Pillai 1930: 1172). Consequently, Pillai's subordinates were able to provide only undocumented estimates of these assets. Finally—and this is a major point of misinterpretation that Pillai does not mention but which will concern us in Chapter 5—the division between the Nakarattars' "own capital" and "borrowed capital" refers to aggregate measures of all Nakarattar capital in each specific locale, not individual loans and deposits between the Nakarattar firms within locales. Such interfirm transactions would cancel each other out in any aggregate analysis—a point that is frequently overlooked. As a result, many analysts apparently take Pillai's characterization of the ratio of "own to borrowed capital" and similar characterizations of

their own business by Nakarattars as applying to individual firms or agencies in a locale, rather than as applying to their aggregation.

With these considerations in mind, the properties that stand out most prominently in the various estimates of Nakarattar business are the Nakarattar investments outside of India and especially in Burma. The following discussion summarizes well-documented conclusions from half a dozen studies of the processes by which the Nakarattar caste expanded its role in colonial Southeast Asia.

Ceylon, 1870–1930

Throughout the nineteenth century and into the 1920s, Nakarattars continued to dominate the rice market in Ceylon (Bastianpillai 1964; Pillai 1930: 1179; Mahadevan 1976: 103). From the mid-nineteenth century onwards, however, their commercial activities were strongly affected by two changes in the Ceylonese economy. One of these changes was the arrival of British exchange banks to fund the Ceylon coffee boom of 1840 to 1870.^[36] The second change was the overall growth in Ceylon's export market, triggered by the opening of the Suez Canal in 1869 and further altered by the destruction of Ceylon's coffee industry in the 1870s and the growth of its tea and rubber industries. The Suez Canal provided the means for much swifter transit time in Asian-European trade generally and, consequently, reduced transportation costs and increased profits in the shipment of all kinds of commodities. Initially, this change provided little scope for Nakarattar investment, for the most profitable investment and the one which dominated the Ceylonese

Figure 2.
Areas under selected export crops, Ceylon, 1870–87. Figures for cinchona
are five-yearly. Source : Rajaratnam (1961); based on Ceylon Blue Book
Statistics, Colonial Office, Ceylon (1870–81); Ferguson's Handbook &
Directory and Compendium of Useful Information (1870–81); Owen (1881).

economy between 1840 and 1880 was coffee, and most coffee plantations were in the hands of the British planters and were financed by British banks.^[37] In the late 1870s, however, a coffee-leaf fungus (hemeleia vastatrix ) destroyed the coffee industry. In the five years between 1881 and 1886, production of coffee dropped from its peak, when the area under cultivation was approximately 322,000 acres, to virtually no acreage under cultivation at all.^[38]

In the aftermath of the blight, Ceylon plantation owners looked for alternatives to coffee. In the process, native Ceylonese found opportunities to increase their share as producers in the (slightly) more diversified economy of Ceylon. The new export crops included cinchona (from which quinine is produced), coconut, cocoa, and the two crops that were to become Ceylon's major exports: tea and, after 1900, rubber (Bastianpillai 1964; Rajaratnam 1961). (See Figures 2 and 3 and Table 4). By the end of British rule, the Ceylonese controlled perhaps 20 percent of the production of tea and 35 percent of the production of rubber, which together accounted for 90 percent of Ceylon's export. In addition, the Ceylonese controlled 100 percent of the production of coconut (Arasaratnam 1964: 161), which continued as the major Ceylonese export product even during the coffee boom.

Ceylonese growers and planters entering the growing plantation industries faced one serious problem, however: no British bank would

Figure 3.
Areas under selected export crops, Ceylon, 1913–21. Source : Rajaratnam
(1961); based on Ceylon Blue Book Statistics, Colonial Office, Ceylon (1913–21).

lend them the funds necessary to purchase land, seed, or fertilizer. Similarly, Ceylonese importers and exporters, coconut millers, arrack renters, and "country boutiques" (rural moneylenders who provided credit to small-scale farmers and farm laborers) were faced with the same problem: where to get credit. The Nakarattars were happy to offer a solution and, according to the Ceylon Banking Commission, provided almost all of the investment capital employed to finance indigenous Ceylonese ventures.

Among the private credit agencies, the Nattukottai Chettiars play the most important part.... It must be said to their credit that in moving surplus capital from places, both internal and external to the point of requirements, they have contributed in no small measure to the development of the island. European enterprises relied upon English funds to acquire lands and develop them into flourishing estates. The Ceylonese had no such external support or own savings to help them. They turned to the Chettiar and found a ready response. (CBC 1934 I: paras. 159–162)

It is difficult to gauge exactly how much capital Nakarattars channeled into the production of different crops in Ceylon for the same reasons it is difficult to gauge overall Nakarattar investment. But their involvement was substantial. Between 1870 and 1916, the number of Nakarattar firms in Ceylon increased from 150 to 700.^[39] By 1929, at the peak of their business, the total volume of business conducted by Nakarattar businessmen was estimated at Rs. 150 million (CBC 1934 I: 42). For reasons touched on shortly below, this volume dropped to Rs. 100 million by 1934, the major difference being a decline in loans available to Nakarattars from British banks. With this decline accounted for, however, it is possible to accept figures prepared by the Colombo Nattukottai Chettiar Association in 1934 (CBC 1934 I: 42; see Table 5) as providing an indication of their business activity. These figures indicate that Nakarattar loans to Ceylonese that were secured by mortgages totaled approximately Rs. 20 million and that loans secured by their pawnbroking operations came to another Rs. 4 million. Nakarattars loaned out slightly more than the amount of these combined categories—Rs. 25 million—in unsecured loans on promissory notes. Finally Nakarattars also deposited about Rs. 5 million with British banks. Besides these assets, totaling Rs. 54 million, the caste association figures also indicate that Nakarattars invested about Rs. 46 million in their own business and properties. That is, their assets were almost evenly distributed between money lending and non-money lending business ventures, with a slight preference for money lending.

Although no confirming evidence was available to me during my research, it seems likely that the proportion of Nakarattar investment in money lending expanded relative to their investment in trade and other business ventures after the 1850s. The major difference in Nakarattar business operations after this time lay in additional sources of short-term funds available to them with the establishment of the British exchange banks. These banks were faced with the problem of investing the considerable funds deposited with them by their British clients. Although the British would not extend credit to Ceylonese, they would make short-term loans to reputable Nakarattar bankers (adathis ) secured only by the cosignature of a second Nakarattar. Nakarattars, in turn, loaned these funds to Ceylonese at a higher rate (Weersooria 1973).

This is not to say that the British banks provided unlimited credit to every Nakarattar. On the contrary, they attempted to build safeguards into their Nakarattar loan operations by excluding small Nakarattar firms from consideration. Loans would be made only if the recipient or cosignatory was on an approved adathi list (see Chapter 6) prepared by the head office of the Imperial Bank of India, which was supposed to keep track of credit worthiness and indicate the maximum amount of loans for which each

firm was eligible.^[40] But the safeguards never really worked. As one expert witness testified before the Ceylon Banking Commission,

As the due dates of the loans vary in the different banks, the Chettiars used to borrow from one bank to pay off their dues to others so that a Chettiar firm which is financially embarrassed can easily tide over its difficulties and if it is actually insolvent the heaviest loss is entailed upon the bank to which the loan is repayable last in order of time.

... The system of inter-Chetty lending was the chief support of the successful working of Chettiar Banking. When in need of liquid funds they lent freely among themselves, at the usual inter-Chetty rate (6 percent or under) or at the rate charged by the banks, whichever was higher, if, in order to accommodate a brother in the trade, a Chettiar had to borrow from a bank. Thus so long as some among the Chettiars had untapped margins of credit at the banks, none of them, whose position was otherwise sound and could prove it to be such to his prospective Chetty creditor, had to fear, in all normal times, any inability to meet his short term obligation to his bank.

Thus the Chettiars through the age-old practice of being their own mutual lenders of last resort, were able to use loans from banks, sometimes from the same bank, to meet the maturing bank loans. To the extent this happened, it was the banks' own money which enabled the Chettiars to keep their loan contracts with the banks with striking promptness.^[41]

The implication is that Nakarattars financed not only short-term loans from their own short-term borrowings, but also risky short-term loans and even long-term loans. If their clients could not repay or if their own short-term borrowings came due before the repayment by a client, Nakarattars could simply repay the British banks, in the manner described in the testimony above, by borrowing from a fellow Nakarattar. The second Nakarattar, in turn, might have borrowed from the very bank being repaid! Since no security was required on the short-term loans that Nakarattars borrowed from British banks, and since Nakarattars found it easy to circumvent the kinds of limits that British banks placed on loans to them, virtually the only constraint on Nakarattar borrowing was their own sense of caution. In the face of a highly expansive export economy, however, there was little need to exercise caution.

The bubble burst in the "Chetty Crisis" of 1925 with the failure of the A. R. A. R. S. M. firm.^[42] In the ensuing bankruptcy hearings, the High Court of Madras estimated the firm's Indian assets at Rs. 800 thousand and Indian liabilities at Rs. 3.7 million; its Ceylon assets at Rs. 150 thou

sand and its Ceylon liabilities at Rs. 1.7 million. According to the Ceylon Banking Commission,

The discovery of the questionable practices of the firm of A. R. A. R. S. M. led [British] banks to look upon those practices as not particular to that individual firm but as possible types which could be and might be adopted by other firms of Chettiars in the island. Accordingly, the banks decided to revise the securities on which they had been doing business with the Chettiars until then and they found to their dismay that many of the securities offered to them by the Chettiars were not safe and others were neither sufficient or adequate. (CBC 1934 II: 253)

The disingenuous British statement of "sudden discovery" served them as a rationale for suspending further credit and calling in all outstanding loans to Nakarattar bankers. No evidence is available to me that suggests any alternative explanation for this change in British bank lending policy. But it is hardly credible that the British banks would loan out Rs. 25 million without some idea about the security of the loans. In any case, their abrupt cessation of all loans to Nakarattars required the Nakarattars, in turn, to call in their loans to Ceylonese clients. The result, as reported by the Colombo Nakarattar association, was a decline in their business volume from Rs. 150 million to Rs. 100 million between 1929 and 1934 (CBC 1934 I: 42).

This was only the start of a series of events that rendered Ceylon inhospitable for continued Nakarattar investment. In addition, and dramatically amplifying every event, the worldwide depression sent prices for agricultural commodities plummeting—including those for tea, rubber, and coconut. What had once seemed safe and profitable loans to Ceylonese made on the basis of projections about expanding markets rapidly became losses. As these loans came due, Nakarattars (faced with their own credit difficulties) refused to grant extensions. Where no other solution was possible, Nakarattars took possession of lands or moveable property securing roughly half the outstanding debts. These actions, in turn, stimulated Ceylonese resentment of the Tamil moneylenders and led to a series of legislative acts and legal proceedings that ultimately drove the Nakarattars out of Ceylon.^[43]

Burma, 1870–1930

Nakarattar commercial activities in Burma followed a very similar pattern to those in Ceylon. They were different in that Burma's economic environment provided even greater incentives for money-lending activities (in

contrast to investment in trade or fixed capital) than did the environment of Ceylon. They were also different in that, in place of Ceylon's plantation crops, Nakarattars directed their Burmese investments primarily toward what Furnivall (1956) has called the development of the Burmese "rice frontier."^[44]

Nakarattars arrived in Burma with the British conquest of Arakan and part of Tenasserim in 1826. The rest of Lower Burma fell in 1852. Upper Burma was not taken until 1886. But by then the Nakarattar-financed development of Lower Burma was already well underway. Nakarattars began to move into Burma in greater numbers following the conquest of Lower Burma. The first major agency houses are reported in Moulmein by 1852 and in Rangoon in 1854. But it was not until the opening of the Suez Canal in 1869 that Nakarattars were really attracted to Burma in a major way.

The canal dramatically reduced the transit time of trade with Europe and, in one fell swoop, opened up the European market for Burmese rice. Lower Burma had been troubled by decades of war and was extremely underdeveloped and underpopulated. In what has become the standard interpretation, Burma was a frontier waiting to be developed. Hoping to encourage that development (and the attendant increase in revenue), colonial authorities enacted the Lower Burma Land and Revenue Act of 1876, which established important changes in Burma's land tenure laws (Adas 1974a; Furnivall 1956; Siegelman 1962). The intended purpose of the act was to provide settlers with a clear title of ownership to land that they occupied and on which they paid taxes for a period of twelve years. An additional, unintended (but, from the colonial point of view, beneficial) consequence of the act was that it provided settlers with land to mortgage as security for loans to buy seed and fertilizer, and to meet other expenses.

As in Ceylon, a major reason for the Nakarattars' success in Burma is that they incurred relatively low costs in acquiring loanable funds from each other, from the British banks, or from the Imperial Bank of India; low costs, that is, relative to the cost of credit faced by Burmese or Chinese lenders who lacked access to these institutions.^[45] Consequently, Nakarattars could charge lower rates of interest than their competitors did and still make a healthy profit. No figures are available to me that allow for a precise reconstruction of the Burmese credit market between 1870 and 1930. But figures are available for the years immediately after this time. They provide a good indication of Burmese interest rates from various sources (Table 6), and, although there may have been fluctuations in rate averages over the sixty-year period, there is no reason to believe that the overall structure of the credit market would have altered.

This is not to say that Nakarattars thereby endeared themselves to their clients. On the contrary, they were the objects of considerable resentment (Adas 1974a). Moreover, as Siegelman (1962: 240) points out, although Nakarattar interest charges were relatively low, their rates (and the concomitant profits) exceeded the profits that could be obtained by rice cultivation. This was particularly the case when, as a condition of his loan, a cultivator was required to sell his crop or repay the loan by giving the moneylender title to his crop at a predetermined, submarket price. The issue raises the interesting question of whether the Land and Revenue Act of 1876 had any consequences other than providing security for Nakarattar agricultural investment and enticing agricultural labor from Upper Burma and Madras with misleading promises of land ownership. In other words, the Act of 1876 seems to have accomplished little more than to provide new clothing for precolonial forms of agricultural tenancy and landless labor.

In any case, the situation was ideal for Nakarattar operations. The rice-frontier economy of Lower Burma was even more expansive than Ceylon's, and a broader spectrum of agriculturalists could offer good security for loans. The consequences are not surprising. Figures on Nakarattar investment provided by the Burma Provincial Banking Enquiry Committee in 1930 (BPBEC I: 211; see below) indicate a preference for money lending over other forms of investment of roughly two to one. Tun Wai believes the ratio to have been far higher than this.

The bulk of Nakarattar investment went directly to loans for agriculturalists. Reports for 1929 indicate that in Lower Burma (where Nakarattars invested the bulk of their money) about Rs. 110–120 million was advanced in short-term loans to agriculturalists. Another Rs. 32–33 million was advanced in intermediate and long-term loans (BPBEC 1930 I: 2). In addition, Nakarattar investment in rice trading was also substantial. Nakarattars provided roughly two-thirds of all agricultural credit, and in many of Burma's provinces Nakarattars provided nearly 100 percent of loans to rice cultivators (BPBEC 1930 I: 67–68). These loans frequently took the form of forward contracts which entitled the moneylender to receive the crop in repayment. It is not clear whether taking possession of such crops should be regarded as a return of interest on Nakarattar money-lending activities rather than as a profit from their investments in rice trading. But in any case, according to A. Savaranatha Pillai (1930: 1177), Nakarattars used their advantageous position as both moneylenders and rice traders to control as much as 50 percent of Burma's rice crop. From this point, their choices broadened. They could sell the rice to British traders, or they could compete with the British, either sending it directly to Madras and Ceylon or, from at least 1916 on, by first milling it in Nakarattar-owned mills in Burma (Indian Industrial Commission 1919 V: 543, cited in Mahadevan 1976: 191). Besides these investments, a few elite Nakarattars were also involved in Burma timber and oil (Krishnan 1959: 31).

Available estimates of Nakarattar sources and investments of capital share all the problems already encountered in grappling with data collected by the Madras and Ceylon banking enquiry committees. In addition, new problems creep into the task of interpreting available Burmese data. Tun Wai (1962: 42), a Burmese banking authority, presents consolidated balance sheets for Nakarattar liabilities and assets in 1929 and 1934, respectively, prepared for him by the Rangoon Nattukottai Chettiar Association (see Figures 4 and 5). Examination of the assets and liabilities for 1929 immediately indicates the highly liquid quality of Nakarattar assets prior to the depression: Tun Wai estimates that 100 percent of Nakarattar assets were in cash, hundis , or loans. After the depression, slightly less than 17 percent of Nakarattar assets were liquid; the balance was tied up in land and houses.

However, Tun Wai's classification is problematic on at least two counts. For one thing, he employs categories entitled "Deposits in Madras" and

"Deposits in Burma" as liabilities. This is somewhat mysterious. Since the amounts under these categories appear as liabilities rather than assets, they cannot actually refer to deposits (i.e., assets) held in Madras and Burma. One wonders, therefore, whether they refer to advances from Nakarattars in Madras and Burma (probably in the form of two- or three-month term deposits, in the form of thavanai hundi —see Chapter 5). If so, the figures should recur under the heading "Assets" since one Nakarattar firm's deposit in another's Burmese agency was simultaneously an

asset of the first and a liability of the second. They do not, in fact, recur in this fashion. Nevertheless, disregarding one or the other side of ledger entries for interfirm deposits is entirely consistent with the kinds of practices in which Nakarattars were caught out in Ceylon. So the question is left open.

A second problem arises in the category of liabilities that Tun Wai lists as "Proprietor's and Relatives' Capital." He is careful to acknowledge the difference between these two categories in his text, identifying them correctly by their Nakarattar terms as mudal panam and sontha thavanai panam , respectively. He also notes that the proprietor's capital generally made up only 5–10 percent of a Nakarattar banker's capital, while the proprietor's relatives' share made up 60–70 percent. But he never explores the implications of this Nakarattar distinction. Indeed, it never arises again in his analysis and was dismissed in the construction of his chart.

I explore the varieties of Nakarattar deposits in more detail in Chapter 5. For the present, suffice it to say that the significance of the distinction between the proprietor's capital and Nakarattar deposits of various kinds, still to be explored, cannot be overemphasized. Keeping it firmly in mind, the lesson from Tun Wai's balance sheets and his additional comments in the text is, once again, that Nakarattars provided a considerable amount of their working capital from interfirm loans, including their sontha thavanai panam deposits from relatives. These were further complemented by loans from British exchange banks and the Imperial bank. They used very little of their own capital in carrying out their banking business. To place the issue in comparative perspective, the Nakarattars used what is known in Western financial circles as "leverage."

Driven by the world demand for rice and financed by Nakarattar banking operations, Burmese agriculture proved itself the most lucrative Nakarattar investment in British India. By 1929, the number of Nakarattar firms operating in Burma had reached 1,498 (BPBEC 1930 I: 195–196). By 1930, they had channeled from 60 to 80 percent of their total assets into Burmese business: by some estimates, Rs. 750 million (see above). Their role was perhaps even greater than in Ceylon. As they were the primary financiers of Burma's rice industry, their impact is directly visible in statistical measures of the growth of paddy acreage, of expanding rice and paddy exports, and of the wholesale price of paddy in Rangoon markets (see Figures 6–9). The consequences of the world depression were no less remarkable. As commodities dropped and Nakarattar clients were no longer able to meet their interest payments on loans, Nakarattars foreclosed on mortgages and wound up owning over three million acres, roughly 30 percent of all Burmese rice-producing land.

Figure 6.
Acreage under paddy cultivation in Lower Burma, selected years, 1852–1933.
Source: Furnivall (1956: 56–57).

Figure 7.
Wholesale price of paddy in Rangoon markets, 1865–1931.
Source: Cheng (1968: 73); reproduced in Mahadevan (1978a: 341).

Malaya in the Late Nineteenth and Early Twentieth Centuries

A similar process of British pacification and integration into the world economy occurred in Malaya. Again, Nakarattar capital followed the British flag. Arriving at the newly opened British ports of Malacca, Penang, and Singapore in the first third of the nineteenth century, Nakarattars quickly moved to dominate the Asian opium market by extending credit to Chinese traders. By the 1870s and 1880s, they financed most of the opium trade in Singapore and Penang and monopolized a position as intermediaries between British exchange banks and Chinese traders. According to Compton Mackenzie's study of the Chartered Bank of India, Australia, and China, most of that British bank's business

Figure 8.
Exports of rice from Lower Burma, by destination, 1878–86 and
1889–99. Actual figures are available for only eleven months; one month is estimated.
Source: Siegelman (1962: 105). Figures for 1878–86 based on Report on the
Administration of Upper Burma during 1886 (1887: 27). Figures for 1889–99
based on Nisbet (1901: 431).

Figure 9.
Decennial export of rice and paddy from Burma, 1901–31.
Source: Cheng (1968: 201); reproduced in Mahadevan (1978a: 241).

with local non-Europeans consisted in the discount of Chinese promissory notes made over to Nakarattar bankers (MacKenzie 1954: 108–112; see also Allen and Donnithorne 1957: 204–405; Mahadevan 1978b: 147). In fact, Nakarattars obtained most of their Malayan revenue in this way: discounting (i.e., cashing) Chinese promissory notes and bills of exchange and rediscounting them at European banks (Allen and Don-

nithorne 1957: 205). The European banks were not willing to extend discounting services directly to Chinese traders themselves, but they were quite happy to deal with agents for the largest Nakarattar firms. Nakarattar profits were generated by the difference between their discount rate and the British discount rate.

When, beginning in 1914, the British moved in a major way to dig mines and build plantations in Malaya, the Nakarattars were positioned to provide their customary financial services. The opening up of the Malayan interior to commodity production for international trade followed the same "developing frontier" pattern as in Burma (Allen and Donnithorne 1957; MacKenzie 1954; Mahadevan 1978b; Sandhu 1969). In 1900, in Malayan territory there were perhaps 5,000 acres devoted to rubber cultivation; in 1911, there were 543,000 acres; in 1938, there were 3,272,000 acres (Mahadevan 1978b: 147). Malayan production of rubber to meet the growing world demand is also measured by her exports of rubber (see Figure 10).

The biggest beneficiaries were undoubtedly European firms such as Dunlop or Guthries (Allen and Donnithorne 1957: 112–114). But Nakarattars, who secured loans with mortgages to rubber gardens and plantations and who—at least in the case of the largest firms—invested money directly in the purchase of rubber estates, wound up in 1938 with most of the 87,795 acres owned by Indians in Malaya (Arasaratnam 1970: 96; Mahadevan 1978b: 150; Sandhu 1969: 288). Malaya's tin industry developed simultaneously with her rubber industry. As recently as 1910, the Chinese controlled more than three-quarters of the tin industry. But shortly after this, the Europeans moved in and, by 1930, controlled more than three-fifths of Malaya's tin export (Allen and Donnithorne 1957: 42; Mahadevan 1978b: 149; Sandhu 1969: 279). Meanwhile, tin exports rose from 40,000 tons in 1895 to 67,000 tons in 1929 (Mahadevan 1978b: 149; Sandhu 1969: 279). Like the owners of rubber gardens and plantations, tin mine owners (especially Chinese and Malayan owners) found difficulty in obtaining credit from European bankers and frequently turned to Nakarattars. This situation, in turn, introduced the Nakarattars to direct investment in mining, both through foreclosure on defaulted loans and through direct purchase.

The depression of the 1930s hit Malaya's export-oriented colonial economy just as it had Burma's. Prices on tin and rubber plummeted. The immediate effects were witnessed in widespread default and foreclosure on loans and the consequent transfer of property to Nakarattar banking firms. The government attempted to stop this transfer in 1931 by introducing the "Small Holding (Restriction of Sale) Bill" under which no sale of land in

Figure 10.
Exports of crude rubber from Malaya, selected years, 1900–1929.
Source: Mahadevan (1978b: 147), based on Allen and Donnithorne (1957: 295).

excess of twenty-five acres could be sold without the consent of the State. Many small Nakarattar firms went bankrupt, as did some medium- and large-size firms. But in general the effects were not catastrophic to the degree that they were in Burma, and many Nakarattars remained and continued to invest and profit in various sectors of Malaya's economy.

A Final Comment on Nakarattar Commercial Expansion

Nakarattar businessmen boasted a remarkably successful commercial record during the colonial period. They outcompeted other groups for an important slot in the Southeast Asian credit market. They doubled their assets every ten years for the thirty-year period for which figures are available (1900–1939; Pillai 1930 I: 186). Even the brief overview of their investment activities given above reveals their impact in financing much of Burma's rice industry, much of Malaya's tin and rubber trade, the Southeast Asian opium trade, and an important part of Ceylon's plantation economy. I have not described the similar role they played in Indochina.^[46] But for the period from 1870 to 1930, the pattern of their specialization as a merchant-banking caste with a uniquely important role in Southeast Asian society is beyond question.

Nakarattar success was clearly linked to their ability to master the changing institutional framework of British colonial government and to act as middlemen between the colonial government and colonial society at large. The dramatic economic expansion of the caste as a whole can only be understood as a consequence of the effectiveness of the system of Nakarattar social organization for carrying out activities of financial intermediation, capital accumulation, and investment.

5
Banker's Trust and the Culture of Banking

Banker's Trust?

The notion of "banker's trust" has a paradoxical quality, like "burning cold" or "military intelligence." Common sense (another paradoxical notion) tells us that bankers have no trust. Perhaps this feeling explains the appeal of Marxist and Weberian assumptions that capitalist economies tend to destroy precapitalist social formations based on trust. From the classic perspective, primordial social ties mandate relations of trust (or something like them) in kin groups and castes only so long as the members of these groups do not operate directly—as bankers do—within a capitalist economic system. The classic view is reinforced by recent influential studies of indigenous Indian commerce during the colonial period. According to historians such as Christopher Bayly (1981, 1983) and David Wash-brook (1975, 1976), powerful merchants traded goods and credit within complex networks that transcended ties of kinship and elevated ties of class over ties of caste. The implication, again, is that caste and kinship played little or no role in the emerging capitalist economy of colonial India.

Yet ties of caste and kinship can make substantial contributions to a capitalist's enterprise. And trust is an essential ingredient for making loans or deposits, regardless of whether a banker and client maintain a primordial or a contractual relationship. The present chapter suggests that, in at least the case of the Nakarattars, even merchant-bankers whose businesses crosscut caste boundaries relied on caste and kin organization for a significant proportion of their credit needs. Nakarattars built their commercial empire out of a complex network of interdependent family business firms. Each firm was involved in commodities trading, money lending, domestic

and overseas banking operations, or industrial investment. Beyond this specialization—making possible every other commercial venture in which it engaged—each family firm operated as a commercial bank: taking money on deposit and drafting bills and other financial instruments for use in the transfer of lendable capital to branch offices and to other banks. As a result, every Nakarattar firm was tied together with all of the others to form a unified banking system.

This is not to say that the banking system resembled an economist's model of Western-style banking systems. In the Nakarattar system, banking firms as well as other communal institutions were all tied together by relationships of territory, descent, marriage, and common cult membership (see Chapters 8, 9 and 10). In other words, the Nakarattar banking system was a caste-based banking system. Nevertheless, Nakarattar and Western-style banking systems shared two fundamental properties: (1) they maintained networks of individual banks which directly or indirectly invested and deposited funds in one another; and (2) these networks supported special institutions for accumulating and distributing reserves of capital that affected rates of interest and the cost and supply of credit and money. The present chapter explores Nakarattar financial transactions and the financial instruments that were transacted.

Nakarattar Interest Rates and Deposit Banking

Nakarattars took two primary considerations into account when they made a financial transaction: (a) the nature of the social relationship established by the transaction, and (b) the conditions under which the principal amount of the transaction needed to be returned to the creditor. On this dual basis Nakarattar bankers distinguished four basic kinds of deposits and many kinds of loans. My concern here is only with deposits.

Nakarattar bankers accepted two kinds of current deposits into kadai kanakkus ("shop" accounts). These comprised demand deposits and a uniquely Nakarattar transaction called a nadappu or "walking" deposit (discussed below). Nakarattars also accepted fixed-term (two-, three-, or six-month) deposits from fellow Nakarattars into thavanai kanakkus ("resting" accounts) and fixed-term deposits from non-Nakarattars into vayan vatti kanakkus (fixed-interest accounts). The interest rate for nadappu deposits served as a benchmark for rates paid on other deposits and in this respect was similar to the prime lending rate set by the central bank of a modern nation-state. The nadappu rate represented the interest that Nakarattars paid each other for deposits made into their kadai kanakku accounts. The rate was established on the sixteenth day of every month at meetings of Nakarattar bankers in major business centers—notably, Devakottai, Madras, Colombo, Penang, and Rangoon. Kadai

kanakku deposits paid simple interest at the nadappu rate calculated for the period during which a deposit was maintained. By contrast, thavanai deposits paid compound interest calculated by adding the appropriate increment to the principal at intervals of two, three, or six months, depending on the terms of the deposit. Vayan vatti deposits paid interest at a rate calculated by the addition of a few annas per month over the nadappu rate (1 anna = 1/16 rupee). But, like kadai kanakku deposits, they paid only simple interest.^[1]

These Nakarattar interest-setting practices established a staggered system of interest rates, which had two consequences. First, it allowed bankers to attract relatively cheap nadappu deposits from fellow Nakarattars for use in current accounts, subject to unpredictable demand. Second, it allowed them to attract more expensive, but more predictable, fixed-term thavanai deposits from fellow Nakarattars with no immediate cash-flow crisis. In both cases, Nakarattars assured themselves of access to deposit capital at a cost that was cheaper than the vayan vatti rate paid to non-Nakarattars, and far cheaper than the interest charges incurred by borrowing money in secured or unsecured loans (see Appendix A).

One aspect of Nakarattar techniques for establishing and standardizing interest rates deserves comment in the present context. The procedure is described in the Report of the Burma Provincial Banking Enquiry Committee:

[The nadappu rate] is fixed in the evening of the 16th of every Tamil month at a meeting held at 9 p.m. in the Nakarattar temple at Rangoon, and it holds good for all the current Nakarattar month including the sixteen days already passed.... The meeting discusses the general financial situation, and fixes the current [nadappu ] rate for the current month with this, taking into account the current pitch and tendency of the thavanai rate, the rates current amongst the Marwaris, Multanis, and Gujeratis [other Indian banking castes] and the rates for advances by the joint-stock banks to Nakarattars. As every firm has both income and expenses determined largely by this rate, great care is taken to fix the rate according to the needs of the situation. But for the first sixteen days of the month before the rate is fixed, there is a general consensus of opinion as to the rate that will be fixed, the weekly adjustment of thavanai rate and the discussions incidental to that adjustment being sufficient guide. (BPBEC 1930 I: 225)

According to this description, the relationship between nadappu and thavanai rates gave mathematical priority to the former in that the simple nadappu rate was taken as the basis for calculating compound interest payments on thavanai deposits. In practice, however, nadappu rates were fit to the fluctuating interest paid on thavanai rates; that is, they were fit to

interest rates that Nakarattars were willing to pay in order to maintain a predictable reserve of capital in the form of thavanai deposits. Prior to the 1920s, determining the thavanai rate had apparently been a relatively informal affair, subject to competition among Nakarattars for deposits. But by 1920, the thavanai rate was "fixed in a systematic way every Sunday morning at 9 o'clock by a meeting in Rangoon temple, subject to modification during the week in case that [was] generally desired by the community.... It [was] not fixed according to the current [nadappu ] rate; in fact the relationship [was] the other way about, the course of the thavanai rate being a consideration when fixing the current rate" (BPBEC 1930 I: 227).

The significance of this procedure in the present context is the light it casts on the Nakarattar understanding of banking. For Nakarattars, the primary consideration in setting interest rates was to attract fixed-term thavanai deposits and thereby maintain a predictable reserve of capital to underwrite the full range of their credit-extending activities. Without this ability, each individual banker would have had to depend on his own personal capital to finance money lending and commodities trading. But, by working together in a reliable and systematic way, by setting interest rates, and by ensuring each other inexpensive access to deposit capital, Nakarattars were able to draw upon the collective assets of the entire caste.

This is not to say that each Nakarattar attracted deposits from all Nakarattars. The system as a whole was divided into local segments, based on residential and kinship groupings as well as on the location of agency houses. Membership in these different segments was not exclusive, and Nakarattars maintained crosscutting ties in various differently constituted segments. But segmentation did not eliminate the flow of deposit capital. Rather, it created the channels through which capital flowed, by defining social and financial distances between bankers. Finally, the largest Nakarattar bankers, called adathis or parent bankers, functioned as linchpins for the entire system by acting as clearinghouses for the transfer of financial instruments from firms who might have no dealings with each other but who shared a common relationship with an adathi .

Hundi Transactions and Other Transfers of Credit between Nakarattars

The major Nakarattar financial instrument for all transactions was the hundi , a kind of bill of exchange or written order for payment that its drawers used much in the way that Americans use checks drawn on their checking accounts. In order to draw a hundi , a client had to open an account and maintain a correspondence relationship with a banker.^[2]

Hundis were sometimes used just to transfer funds from one location to another (a service employed primarily by Nakarattars among themselves), but they were more typically employed in financing trade transactions by Nakarattars and non-Nakarattars alike. Tun Wai (1962: 50) estimates that, before 1930, perhaps 75 percent of Nakarattar hundis in Burma were trade hundis . In such cases, a paddy merchant, for example, bought a shipment of paddy at a local market in Burma with cash that he transferred to the seller by drawing a hundi on his account in a local Nakarattar banking office. The Nakarattar banker cashed the hundi , receiving a discounting fee of 1 to 3 percent, and took custody of the railroad receipt for the paddy shipment, even though the transaction was not a loan and did not incur rates of interest charged on loans. The banker sent the hundi and the receipt to his firm's main office in Rangoon along with instructions to debit the merchant's account. If the banker had no office in Rangoon, he sent the hundi and receipt to another banker (perhaps, but not necessarily, an adathi ) with whom he maintained an account. The first banker could thus rediscount the hundi with the second banker, who normally extended the service without charging a further discounting fee. In order to regain the railway receipt and take possession of his paddy from either banker, the merchant had to maintain a deposit account with the Rangoon banker in a satisfactory manner.^[3]

Nakarattars made use of four basic hundis:

Available information about dharsan and nadappu hundis is generally confusing and inconsistent. For example, although most authorities suggest that all Nakarattar demand drafts paid interest at the nadappu rate, examination of sample hundis reproduced in the Report of the Madras Provincial Banking Enquiry Committee (1930) reveals a subset of dharsan hundis that paid no interest (see Appendix B).

In fact, this inconsistency is less problematic than the suggestion that both hundis paid identical interest at the nadappu rate. If it was the case that no dharsan hundi paid interest, people would have paid the dharsan discount fee only if they wanted to transfer capital and guarantee cashing at their convenience rather than their banker's. They would have drawn nadappu hundis only if they had no expectation of any cash-flow crisis, if they viewed their nadappu deposits as safe interest-bearing deposits, and if they had no worries about their banker's ultimate ability and willingness to cash the hundi . The fact is, however, that some dharsan hundis did pay interest. Their availability creates a puzzle because the liquidity of dharsan hundis would have eliminated any incentive to draw nadappu hundis , which had an identical yield but uncertain conditions of cashing. One possible solution is that Nakarattar bankers may have had sufficient control over mechanisms for transferring funds to withhold dharsan hundis from clients and, instead, to offer nadappu hundis as the only available option. Another and even more likely solution is that the drawing of hundis was quite a flexible matter and hinged on the specific situation of drawer and drawee. This explanation would account for inconsistency on the part of analysts attempting to construct a uniform model of Nakarattar hundis .

The kind of flexibility that seems to be suggested by the evidence of hundis themselves raises another problem, however, because Nakarattar bankers also offered clients facilities for drawing sixty- to ninety-day thavanai deposits. It is not clear why anyone should wish to deposit his money at the lower nadappu rate of interest unless he was assured of definite repayment more quickly than the terms to maturity offered by thavanai hundis . We can only assume that the actual performance of Nakarattar bankers confirmed their financial trustworthiness and ability to meet demands for repayment without causing unacceptable cost or delay.^[6]

Hundis were not regulated under colonial laws concerning negotiable instruments and were distinguished from "true" bills of exchange on the

ground that their terms for encashment were not unconditionally specified. In general, the hundis specified two conditions of payment: (1) they indicated the particular fund which the drawer was to reimburse or a particular account which was to be debited with the amount, and (2) they included a statement of the transaction which gave rise to the bill. In addition, nadappu hundis specified no obligatory conditions for cashing whatsoever. Because of the former stipulations and because of the absence of stipulations about payment in the case of nadappu hundis , all Nakarattar hundis fell outside the scope of the Negotiable Instruments Act, and hence were legally unenforceable (MPBEC 1930 I: 51–52; BPBEC 1930: 150, also cited in Tun Wai 1962: 50; Krishnan 1959: 53).

Despite this lack of stipulation, it is important not to invest the legal view of hundis as nonnegotiable with more significance than it deserves, especially when that view coincides with an unclear understanding about the sanctions and procedures under which hundis were actually drawn. Although Nakarattar hundis had no standing in a court of law, Nakarattar bankers made collective decisions about interest rates that standardized the cost of credit. In addition, their own communal tribunals (panchayats ) and their practice of maintaining custody of railway and shipping receipts on trade hundis provided a check on dishonest practices. In other words, together with careful accounting procedures (see below) and a practice of systematic correspondence between cooperating bankers, the various collective Nakarattar institutions effectively regulated transactions and minimized the risk of default to a remarkable extent. Indeed, one banking expert, whose personal knowledge of the system allowed him to keep the law in perspective, notes: "In the case of 136 firms doing business in Chettinad to the extent of 11 crores of rupees [Rs. 110,000,000] the bad debts come to only Rs. 4.3 lakhs [Rs. 430,000] which works out to 1/2 percent on the total volume of business" (Krishnan 1959: 41).

Accounting

The clearest evidence for reconstructing the Nakarattars' financial activities during the colonial period is contained in account books and ledgers maintained during the heyday of their Southeast Asian commercial empire. In many cases, these books may presently be found moldering and ant-eaten in dusty corners of the great houses of Chettinad, the Nakarattar homeland in Tamil Nadu. The detailed record that they leave us of commercial activities throughout South India and Southeast Asia represents a still untapped resource for historians. But it is one that is rapidly

vanishing and merits attention before the opportunity is irrevocably lost. The following discussion is based on analysis of account books maintained by a large Burmese agency for the years 1912–1915 and 1918–1921. I refer to these books primarily to describe Nakarattar accounting categories and the sources of capital available to a Nakarattar agency. I do not use them to characterize the specific financial role of this firm (let alone of Nakarattars taken collectively) in the context of Burmese and Nakarattar commercial history.

I carried out my analysis with the assistance of a retired Nakarattar banker, who deciphered both the standard Tamil alphabetic code employed for numerals and the handwriting of the agency's bookkeepers.^[7] Even more importantly, he interpreted the different categories of entries and explained to me some of the strategy that went into operating a successful business operation in Burma. With his help, it was possible to clarify many aspects of Nakarattar business practice that remain vague in descriptions supplied by the reports of the Banking Enquiry Committees of Burma, Ceylon, and Madras.

Nakarattar account books were designed to accomplish many functions. One book, called a peredu , recorded all payments and receipts. My informant claimed that it represented a general ledger and that it employed double-entry bookkeeping. I am not at present prepared to grant the accuracy of these English glosses of a technical Tamil accounting vocabulary, as the ledgers do not, in fact, appear to comply with the principles of double-entry bookkeeping. The peredu I examined seemed to consist of a number of subsidiary ledgers describing various transactions and listing the associated payments or receipts in two separate columns: one for credit entries (adhaya ) and one for debit entries (varavu ). Unlike the transactions in an American double-entry bookkeeping system, however, each transaction was recorded as a single entry. There was no simultaneous entry crediting or debiting the agencys' cash account for the same amount. Instead, the two columns of figures describing each account seemed to provide a way of correlating the expenses incurred by the account with the income it generated. In some cases, this gave the appearance of a standard, Western-style double-entry system (i.e., where credits equal debits). But this similarity was purely accidental, or else it reflected some real-world understanding that existed between banker and client, rather than a bookkeeping procedure. Since this is a point about which there is some confusion, it is worth emphasizing that a peredu's debit and credit entries seemed to represent clearly separate transactions and frequently showed a net difference between credits and debits. Nevertheless, its correlation of income and expenses incurred by an account may be what my informant

meant by double-entry bookkeeping. It is also the case that each column of figures recorded in the peredu maintained a running total and provided a final net balance for each year. But I could locate no general ledger summarizing all of the various transactions, nor any overall balance sheet. In other words, a peredu lacked the defining characteristics of a Western-style general ledger.^[8]

In general, the function of Nakarattar books was to provide a picture of an agency's relationship with each of its clients, with separate listings of expenses and revenues. This function served the interests of both the agent and his client. Entries were carefully made on the occasion of any financial transaction, rather like in a passbook in a U.S. savings bank. In some cases, they were even initialed by the client. In any case, the information these ledgers contained could, in principle, have been pulled together into a general ledger and a balance sheet. But they were not. In Table 7, I provide a list of the different kinds of subsidiary ledgers apparently contained in the peredu of a Burmese agency house. Figure 11 represents my own provisional summary of these figures, utilizing a general ledger projected on the basis of information contained in the peredu ledgers. And Figure 12 provides a balance sheet for the agency for the period under review.^[9]

Nakarattar books were not confined to the various component ledgers constituting a peredu . They also included a pekki pustakam , a subsidiary book containing figures for outstanding dues, debts, and deposits. No record of payments or receipts was maintained in the pekki pustakam . However, a separate book of vatti chittis (interest calculation sheets) did provide records of interest payments for clients who maintained deposits with the agency. A daily cash book (kurippu ) kept track of the complicated transactions that went on every day. The amounts listed as paid or received in the kurippu may also have been recorded in the last component ledger of the peredu . But, because these final entries lack any description of the content of transactions they record, I am not entirely confident about this interpretation. Finally, copies of all correspondence were maintained in a press copy book . I was unable to recover any Tamil name for this book. It consisted of carbon tracings—"press copies"—of all correspondence.^[10] Taken together, the information contained in these Nakarattar books of account and correspondence cast considerable light on the role of this particular agency at this specific period in history. But, as already indicated, the present paper confines itself to a structural analysis of the agency's relationships with its various depositors, especially as these are captured in the peredu accounting categories of the Burmese agency whose books were available to me.

Proprietor's Capital and Deposit Capital from Other Nakarattars

Before presenting my analysis, I wish to emphasize an important distinction between, on the one hand, governmental classifications of total Nakarattar assets and, on the other hand, Nakarattar accounting categories employed as part of individual business operations. This distinction is important because most analyses of Nakarattar capital are concerned with the former and base their classifications on testimony and interviews with members of the Madras, Rangoon, or Colombo Nattukottai Nakarattar Associations, presented to various Provincial Banking Enquiry Committees around 1930. In general, these documents estimate that the ratio of Nakarattar "borrowed capital" to "own capital" was between 15 percent and 35 percent. The report of the Burma Provincial Banking Enquiry Committee (1930 I: 211–219) provides the highest estimate of the proportion of borrowed capital in Nakarattar operations, noting that "out of total Nakarattar working capital of over 75 crores [Rs. 750 million], over 2/3rds, i.e., 53.5 crores [Rs. 535 million], was the capital of the proprietors or partners of the firm; 11.5 crores [Rs. 115 million] were deposits from Nakarattars, and Rs. 10 crores [Rs. 100 million] was the sum borrowed from the European banks and non-Nakarattars."

Based on this and similar kinds of testimony about the distribution of Nakarattar assets, authorities such as Pillai (1930 I: 186) and Tun Wai (1962) draw conclusions about aggregate Nakarattar liabilities. As noted in Chapter 4, for example, Tun Wai (1962: 42) makes use of figures supplied by Nakarattar expert witnesses when he classifies Nakarattar liabilities in predepression and postdepression Burma, noting that the Nakarattars'

own capital represented 60 percent of all their capital in 1929 and 84 percent in 1935. Examination of the assets and liabilities for 1929 (Figure 4) confirms the highly liquid quality of Nakarattar assets prior to the depression described in Chapter 4. Tun Wai estimates that 100 percent of Nakarattar assets were in cash, hundis , or loans at that time. By contrast, their 1935 assets and liabilities (Figure 5) indicate the impact of the depression on the liquidity of these assets. The point I wish to emphasize here, however, is Tun Wai's primary focus on the overall role of the Nakarattars in Burma. He is not concerned with either the social or the financial implications of distinctions that Nakarattars made in accounting categories used by individual businessmen. This is because, like expert witnesses from the Rangoon or Madras Nakarattar associations, Tun Wai was not describing the capital structure of an individual agency or firm, but the aggregate capital of the entire caste's operations in Burma.

By contrast, as Tun Wai notes, Nakarattar businessmen did need to maintain accounts of individual transactions, and they were careful to distinguish between the proprietors' own capital (mudal panam ) and deposits by close relatives (sontha thavanai panam ). Unfortunately, not all authorities are as careful as Tun Wai and some, apparently, succumb to a temptation to generalize from the characterization of aggregate Nakarattar capital to the capital structure of individual Nakarattar firms and agencies. Such commentators simply assume that the aggregate category, made up of funds owned by all Nakarattars and their relatives, is identical to an individual Nakarattar businessman's classification of his own personal capital. Philip Siegelman (1962: 157), for example, even glosses Tun Wai's combined category of proprietor's and relatives' capital with the Nakarattar term for just the proprietor's capital, mudal panam . Once such assumptions are made, the conclusion is obvious: Nakarattar banking relied very little on deposits. But this conclusion is not supported by available evidence. On the contrary, it is clear from information contained in Nakarattar account books and from interviews with surviving Nakarattar bankers that there are major differences between aggregate classifications of Nakarattar assets provided to banking enquiry committees and the nonaggregated classifications of liabilities that Nakarattars employed in their own account books. One of the most significant differences reflects precisely the importance of different kinds of deposits just among Nakarattars themselves.

My informants all confirm Tun Wai's interpretation of mudal panam as confined in its application to proprietor's capital only. But none of them employed the single contrasting category of sontha thavanai panam . Instead, my Nakarattar informants offered a variety of terms segmenting the domain of relatives and kinship. It is likely that sontha thavanai panam

was an umbrella term for deposits from any kin (contakkarar ). Bankers whom I consulted, however, did not use this term at all, but rather the term mempanam ("surplus funds") as an even more-embracing umbrella category to refer to any deposit besides the proprietor's own mudal panam . This category included deposits by relatives such as accimar panam (dowry deposits from in-laws) and dowry deposits from any other Nakarattar outside the joint family (valavu ) that owned the firm. In addition, mempanam also included deposits from non-kin Nakarattars and from non-Nakarattars. The different subcategories of mempanam funds are identified as follows:^[11]

1. mudal panam: principal's personal funds

2. mempanam: all other funds

a. accimar panam: literally, deposits from Nakarattar women; usually dowry monies of wife and daughters-in-law of the proprietor—his affinal relatives (tayati )

b. thanadumural panam or thandu morai panam: deposits from other Nakarattars including agnatic relatives from the proprietor's lineage (kuttikkira pankali ) and clan (kovil ) and non-kin from his own and neighboring villages^[12]

c. kovil panam or dharma panam: deposits from Nakarattar-controlled or -influenced temples

d. adathi kadai panam: loans from Nakarattar "parent banks" (adathis )

e. deposits from Burmese or Chinese clients

f. vellaikkaran panam: loans from European banks, available to only 3–4 percent of Nakarattar bankers—the largest adathis or parent banks.

If we isolate entries for the mempanam deposits in the peredu available to me (corresponding to its items 1, 7, 13, and 14 in Table 7 and Figure 11) and compare them with entries credited to the proprietor's headquarters account (item 2), the lesson is startling. In this agency, at least, mudal panam —the proprietor's own capital—did not constitute 65 to 85 percent of its sources of funds, as it would have if there had been a direct correspondence between, on the one hand, the proportion of aggregate Nakarattar-owned funds to all Nakarattar working capital in Burma and, on the other hand, the proportion of an individual proprietor's own capital contribution to the total working capital of his agency house. Instead, the proprietor's funds in this specific agency constituted barely 12.5 percent of the funds deposited by his relatives.

To summarize, Nakarattar proprietors generally contributed 10 to 20 percent of the working capital of their agency offices in the form of long-

term thavanai deposits. These were frequently repaid to the proprietor in a sequence of regular remittances during the course of his agent's three-year tenure as head of the agency house. Conventions for financial transactions between a banking agency and its clients also depended on maintenance of deposit accounts with the agency. According to Krishnan (1959: 125), non-Nakarattar deposits made up, at most, another 20 percent of an individual agency's working capital. In other words, taking into account the proprietor's own deposits (mudal panam ) and various kinds of non-Nakarattar deposits, it is possible to estimate the proportion of working capital contributed by deposits from other Nakarattar firms as being between 60 and 80 percent of all deposits. Again, this calculation is supported by books from the Burmese agency analyzed above.

One final feature of Nakarattar financial transactions should also be remarked in connection with the distinction between Nakarattar and non-Nakarattar clients. In the case of non-Nakarattar clients, transactions were always recorded on a cash basis; that is, only actual cash receipts and disbursements were entered in a firm's ledger. By contrast, transactions between Nakarattars (including between the proprietor and his own agency) were recorded on a mercantile or accrual basis; that is, they credited each other with the appropriate amount of interest due and exchanged vatti chitti sheets (memoranda of interest calculations). The accounts they held with each other were normally reconciled only at three-year intervals, coinciding with the termination of a Nakarattar agent's tenure as head of a banking agency.

Conclusion

It bears emphasizing that Nakarattars loaned and deposited money with one another in caste-defined social relationships based on business territory, residential location, descent, marriage, and common cult membership. Unlike the case in modern Western banking systems, it was transactions between exchange spheres defined according to these principles, rather than decisions by a government-controlled central bank, that regulated reserve levels and assured public confidence in individual Nakarattars as representatives of the entire caste. In other words, the Nakarattar banking system was a caste-based banking system. Individual Nakarattars organized their lives around the participation and management of various communal institutions adapted to the task of accumulating and distributing reserves of capital. The financial transactions in which they engaged created an ensemble of social relations that constituted the Nakarattars as a particular kind of community: a financial community that functioned as both a caste and a bank within the wider Indian society.

6
A Collectivist Spirit of Capitalism

Two Spirits of Capitalism

There are a great many similarities to be drawn between Nakarattar bankers and Weber's Protestant capitalists. The most important of these is undoubtedly the systematic and methodical pursuit of wealth by individuals. As we saw in Chapter 5, this pursuit was facilitated by elaborate accounting procedures to track income and expenses associated with every aspect of daily life: not only transactions between bankers and clients or proprietors and agents, but also transactions between the coparceners of joint families, between the two sides of a marriage alliance, and between every kind of Nakarattar social unit and the myriad deities they worshipped (cf. Chapter 9). Another outstanding similarity between Nakarattars and Weberian Protestants is a markedly ascetic lifestyle. Although the present chapter touches only briefly on this aspect of their culture, in its description of their Spartan banking offices, Nakarattar frugality would have done credit to the strictest Puritan, and has been widely remarked ever since they came to the attention of European chroniclers at the end of the nineteenth century (Capper 1877; Cave 1900; Playne 1914–15; Thurston 1909).

Such similarities, however, mask fundamental differences. According to Weber's analysis, the Calvinist doctrine of predestination and the impossibility of human influence over God's will led to the general Protestant rejection of Catholic magic. This, in turn, led to a "lonely," "individualistic" search for proof of salvation that sanctioned an ascetic pursuit of economic callings. Profit was sought not for its intrinsic value, but as proof of the individual's state of grace. Capitalists did not seek personal rewards,

emotional enjoyments, or any action that could be interpreted as "idolatry of the flesh." Rather, they sought "the good of the many," or "the public good." An individual's state of grace was judged in terms of the person's impact on society as a whole, although this could be gauged by personal wealth.

For the Nakarattars also, profit making went hand in hand with moral duty. Indeed the link was, in many ways, tighter than that which Weber ascribes to his Calvinist businessmen. Not only was business a calling, a religious duty, and even a form of worship, but even apparently nonbusiness forms of ritual worship and religious endowment (arccanai, yatra, kattalai ) were forms of business contracted with the deity. Yet, despite these similarities, the spirit of Nakarattar capitalism was radically different from the spirit of Calvinist capitalism. The Nakarattars' God had multiple forms that were easily approached and influenced in pursuit of worldly goals. Individuals did not, however, use their magical worship in pursuit of personal enjoyment any more than Weber's Protestants did. On the other hand, neither did they pursue the good of the general public. Rather, their actions were directed toward the good of specific social groups to which they belonged: their joint families, lineages, villages, clans, business associations operating out of specific localities, and the caste as a whole. All of these groups were marked by common and collective forms of worship in cults of specific deities, and these collective ritual practices were central to the way business was carried out in the wider society. Thus, the Nakarattar Hindu ethic was marked, from the Weberian viewpoint, by a paradoxical amalgam of rationality and collectivism, rather than by rational individualism.^[1]

One source of difficulty in efforts to compare Nakarattar and Protestant capitalists directly is the popular assumption—due largely to Weber's treatment of all Hindu religious doctrine—that Hindu beliefs about religious merit and reincarnation hold the same central influence over behavior that Weber ascribes to Calvinist beliefs about spiritual grace and predestination. This is simply a mistake. Contrary to Weber's treatment and to subsequent popular Western notions about Hinduism, religious duty (dharma ) as prescribed for different castes in Hindu scriptures is aimed at achieving intangible, other-worldly goals (adrstartha ). It has very little to say about the conduct of everyday life. In particular, it has almost nothing to say about a person's livelihood (jivika ) or the pursuit of tangible, this-worldly goals (drstartha ) by members of different castes (cf. Rocher 1975).

An equally important difficulty encountered in comparisons between Nakarattars and Protestants was pointed out by Edward Harper (1964) more than twenty years ago: namely, that Hindus are, by and large, less

concerned with orthodoxy than with orthopraxy. Thus, whatever the arguments for rooting explanations of Protestant conduct in interpretations of doctrine (and even Weber occasionally expressed misgivings about this tactic), any appeals to religious doctrines for explaining Hindu conduct should be treated with extreme caution. In this chapter, at least, I am much more concerned about the capitalist spirit expressed in ritual and business practices than the spirit expressed by religious doctrine. My essay does not attempt to survey the full range of practices influenced by the Nakarattars' capitalist spirit. Instead, it reports more narrowly on those characteristics of practices in Nakarattar "business stations" that illustrate their collectivist orientation.

Three Models of Nakarattar Banking Organization

Scholars who have studied the Nakarattar banking system point to three institutions as central to its organization: the family, the agency, and the local caste association. But the historical interpretation of these institutions is contradictory. According to the Japanese sociologist Shoji Ito (1966), familial institutions have undergone an evolution that corresponds to the post-1930s diversion of Nakarattar investment funds from mercantile and banking activities into capitalized industry. Contrary to the model formulated in my own work, Ito believes that the preindustrial Nakarattar banking system was based on autonomous decision-making powers vested in the conjugal unit of their kinship organization, the pulli . He supports this position by appealing to Thurston's (1909) description of the yearly allowance allotted to pullis by the senior male of the joint family to which the pulli belonged. According to Ito, the allocation of these allowances gave pullis complete independence from joint family control.

Ito argues that, unlike many other castes, the Nakarattars emphasized decision making by the pulli , rather than by joint families, which resulted in an individualistic, Western-like motivation structure for Nakarattar businessmen rather than a structure of group-oriented motivations directed toward the needs of larger kinship units or of the caste as a whole. From this conclusion, he draws two further inferences. First, he explains the great success of the Nakarattars in expanding their banking and trading operations into Southeast Asia during the period from 1870 to 1930 as a consequence of their efficient agency-banking system and its operation by individualistic entrepreneurs. Second, he argues that industrial investment emerged after 1930 because the traditional kinship units constituting the Nakarattar firm (i.e., the pullis or Nakarattar conjugal families) began to coordinate their actions through the operation of joint families in

order to exploit novel opportunities for investment requiring the large-scale, collective pooling of capital.

Ito's model, as already noted, is contradicted by my own findings. Rather than refute it at this point, however, I simply wish to recapitulate the historical thesis of his argument: namely, that Nakarattar commercial organization evolved from a Western-style, individualistic mode of organization that was compatible with agency banking to a putatively Indian-style, joint-family—oriented mode of organization capable of controlling and managing an industrial "combine," monopoly, or conglomerate. I also note that both modes of organization are compatible with theories of Indian commercial organization that downplay any role for caste organization in the conduct of commerce, a position with which Ito appears comfortable. In fact, the only reference that he makes to caste organization beyond the level of the family firm is a reference to locally based caste associations that set interest rates for all Nakarattar agencies operating under their jurisdiction. But even here, the lesson Ito draws is that these associations promoted the individualism of their members. He does not reflect on the collective organization and cooperation presupposed by the operation of these associations.

One recent scholar who does consider the role of interbank organization of Nakarattar firms and agencies is Raman Mahadevan (1976). Mahadevan recognizes traditional intracaste coordination of family firms through localized communal organizations called panchayats . Nakarattar panchayats served as forums for the exchange of information, for resolving disputes, for setting collective interest rates, and for representing Nakarattar interests to local government. Beginning in the 1920s, they were superceded in some places by Nakarattar caste associations. In Mahadevan's view, this shift reflects a period of increasing economic differentiation and stratification within the caste, a pattern that is in part responsible for the emergence of these new forms of community organization. According to Mahadevan, caste associations lack the "sodality" of traditional institutions and represent a growth in the autonomy of individual firms. In other words, Mahadevan sees in the institutional evolution of Nakarattar banking a diminution of the importance of collective organization: precisely the opposite trend from that described by Ito.

The following discussion presents a model of Nakarattar organization that I propose as an alternative to both Ito's and Mahadevan's interpretations. To begin with, I agree with both scholars insofar as they see a post-1920s change in the organization of Nakarattar commercial activities. It seems to me that Ito is correct in seeing that there was a shift into industry,^[2] that the capital available to Nakarattar conjugal families was insuffi-

cient for large-scale industrial investment, and that Nakarattars therefore engaged in coordinated joint-family investment in industry. I disagree with Ito about his assertion that the joint-family firm represented a novel response to industrialization. There is no evidence that conjugal units (as opposed to joint families) constituted the basis of the Nakarattar family firm prior to industrialization. Indeed, my own research suggests that financially successful families responded to incentives for staying together as a joint family and pooling their resources regardless of the nature of their investment or the period in which they did business. That is, joint-family firms are not peculiar to twentieth-century, industrial-investing families. They are also found among elite nineteenth-century families of merchant-bankers, whose early prominence in the political economy of South India paved the way for their twentieth-century investments in industry.

With regard to Mahadevan's model, I agree with his observation about a post-1920s emergence and substitution of caste associations for panchayats . But I disagree with his interpretation. In my view, the emergence of Nakarattar caste associations represents a political adaptation to colonial rule, not a consequence of economic differentiation between caste members. While there is certainly evidence of social stratification and economic differentiation within the caste, there is no more evidence that this is a twentieth-century development than there is that joint families are a twentieth-century phenomenon. On the contrary, evidence for elite status among an elect subset of Nakarattars extends back to the nineteenth-century Nakarattar zamindars and even back to seventeenth-century Nakarattar donors to South Indian temples (Chapter 7). In fact, it seems to me that a small group of elite Nakarattars, called adathis or parent bankers (see below), performed an extremely important role in colonial India, mediating multiple circuits of capital between discrete segments of nonelite Nakarattars, the colonial government, and the society of British India as a whole.^[3]

The major part of the present chapter describes the institutional organization of the Nakarattar banking system in the period from 1870 to 1930. I divide my discussion into sections that describe the component institutions of the system. These sections focus initially on family firms and agencies that functioned like commercial banks with branch offices; on large-scale firms (adathis ) that functioned, in addition, like reserve banks; and on communal caste organizations (vitutis and panchayats ) that facilitated the flow of information and credit while providing mechanisms for avoiding or resolving conflict.^[4]

Families and Firms

Nakarattar banking firms were basically "family firms" which owned and directed the operation of one or more banking offices, plantations, manufacturing companies, or other business ventures outside the South Indian Nakarattar homeland of Chettinad. In general, firms were owned by an undivided joint family (valavu ) containing several coresident "hearth-holds" or "conjugal families" (pullis ) and extending to three or four generations under direction of the oldest active male. Whatever its tangible investments, a Nakarattar family firm's greatest intangible asset was its reputation. Without a reputation for trustworthiness (nanayam ), no family could attract deposits or reassure clients of honesty (or, at least, predictability) and flexibility in the extension of credit. Not surprisingly, family firms were subject to careful public scrutiny. The joint family, itself, was individuated and publicly identified by a distinctive vitu vilacam ("house name") that was formed by stringing together the initial letters of the names of three or four generations of lineal male ancestors, the last name belonging to the senior living male member. Before the 1930s, each family traditionally employed its vitu vilacam as a tolil vilacam ("business name"). It was used as the name of the business firm and was even attached as a prefix to the names of members of other families or other castes who worked for the firm.^[5] When a family divided or when a particular business was solely the property of a single branch of the joint family, the senior male of the newly formed family unit assumed the role of proprietor and added his own initials to that of the family. For example, a Nakarattar named A. K. A. Ct. Alagappa, the son of A. K. A. Ct. Chidambaram, would have taken the name A. K. A. Ct. Al. Alagappa when his father died and he inherited the firm. If Alagappa had employed a non-Nakarattar, that employee would also have been entitled to use the family's tolil vilacam: for example, A. K. A. Ct. Al. Adaikkappa Tevar.^[6] If Alagappa had a younger brother at the time of his father's death, they might have decided to continue ownership of the firm in the joint family, with Alagappa taking over the role of their father as proprietor, or they might have decided to partition the family and the firm. In the first case, Alagappa's brother would have added Alagappa's initials to the tolil vilacam used to prefix his own name: for example, A. K. A. Ct. Al. Muthia. In the latter case, Alagappa's brother would have retained the tolil vilacam of their father's business, but would have added his own initials in order to distinguish his firm from his brother's: thus, A. K. A. Ct. M. Muthia. These naming practices gave the lists of Nakarattar firms that appear in various published contexts an appearance of alphabet soup. But to Nakarattars,

they constituted a detailed road map, readily consulted and easily interpretable.

The precise relationship between the joint family designated by its vitu vilacam and the family firm designated by an often identical tolil vilacam was subject to shifting and contentious legal interpretations. By and large, colonial courts recognized Nakarattar tolil vilacams as designations of business corporations and as distinct from the names of families or individuals who made use of the otherwise identical initials to designate themselves. In Ceylon, the interpretation was even codified under the Business Names Ordinance of 1918, which, among other things, denied an individual's right to carry on business under his vitu vilacam unless it was properly registered as a tolil vilacam with the authorities. There remained, however, ambiguities regarding the legal status of individuals who had proprietary interests in a firm or whose purely contractual connection with the firm entitled them to use the firm's name as part of their own.

In situations in which a conflict of interest arose, the opponents in the conflict frequently sought legal judgment that the ambiguous actor in question had been acting on his own behalf or, conversely, that he had been acting as representative of the firm. It depended on whose ox had been gored and where the remedy lay. But underlying individual motivation and self-interest were fundamental questions about the cultural and legal definitions of social groups and social responsibilities. The issues concerned the financial rights and liabilities enjoyed respectively by four sets of actors: the family's coparceners, the family firm's partners (if any), the firm's proprietor or partners and its agents, and the creditors and borrowers of the firm. Each set, at different times, found itself to have either common goals or conflicting interests. The latter case frequently led to litigation.

Weersooria (1973: 76–125) has reviewed a large body of legal cases in Ceylon that focus on precisely these issues. A few examples provide a sense of the kinds of conflict that could arise. In one court case, a creditor argued that a Nakarattar firm was liable for any obligation that the firm's agent incurred while using the firm's vilacam as part of his name. The firm, for their part, denied blanket liability and argued that their employee's customary use of their vilacam as part of his name did not imply liability unless he had been given full power of attorney. Otherwise they were liable only for those obligations incurred within the restricted range of their agent's contractually specified exercise of power. They argued further that if the plaintiff had a quarrel, it was with their agent as an individual, not with them. Other cases sounded a similar note. In one instance, for example, a Nakarattar creditor argued that there was no legal distinc-

tion between a firm and its joint family owners in order to win legal recognition of the family's liability for the firm's obligations. On still another occasion, a Nakarattar argued that there was a distinction between firm and family on grounds that his investments in Ceylon represented a private business venture, exempt from claims by his brothers. In all of these cases, and numerous others as well, legal definitions of Nakarattar firms, families, and agents were ambiguous, context-sensitive, and subject to constantly shifting and competing interests.

There may be some temptation to misinterpret the significance of these kinds of ambiguity and the attendant possibilities for independent action by family members or nonfamily employees of the family firm. But there is a major difference between, on the one hand, ambiguities in status and, on the other hand, economic autonomy for individual businessmen. It was the joint family that was the focus of individual action and that constituted the primary social unit around which Nakarattars constructed their business firms. Legal ambiguities in the definition of the firm generated conflict, and Nakarattars (and their clients) frequently sought to take advantage of alternative judicial interpretations of rights and obligations. But if such ambiguities generated conflict, they also created flexibility for Nakarattar joint families in responding to the changing business and legal environment of colonial Asia.

Pulli and Valavu (The Conjugal Family and the Joint Family)

The pulli was the basic reproductive and daily consumptive unit of the Nakarattar caste. It normally comprised a married man, his wife, their children, and other dependents. A pulli was formed by registration of a marriage in a Nakarattar clan temple (see Chapter 9) and remained in existence as long as any of its members retained the potential for having children. Hence, both widowers and unmarried children were considered as representing the original pulli formed by the widower and his wife at the time of their marriage; both widower and children were capable of adding new members to the pulli . By contrast, a widow with or without married children (but having no unmarried children) was considered only a "half-pulli ." A widow was viewed as incapable of adding any further members to her pulli .

The literal meaning of the term pulli is "dot," from a trading practice in which dots were employed for reckoning or counting a quantity of some trade good.^[7] In a similar fashion, pullis were the units employed by Nakarattars to enumerate their own population. Nakarattars spoke of the number of pullis belonging to a village or to a variety of larger kin units,

to be described in the present and following chapters (valavu, kuttikkira pankali, and kovil ).^[8]

Much has been made of the fact that pullis were often allotted a yearly allowance by the senior male in the joint family to which they belonged. Nakarattar pullis used this allowance to cover living expenses and to contribute to the cost of private investment (Krishnan 1959; Thurston 1909). Indeed, citing these allowances, Shoji Ito, (1966: 370) concludes that pullis constituted the basic organizational unit of Nakarattar business and that they were completely independent of higher-level units of Nakarattar kin organization until the 1930s.

All of Ito's conclusions are directly contradicted by my own findings. To begin with, the pulli was but the smallest unit of Nakarattar kinship organization (see Chapters 8 and 9) and, in many ways, seems to be the least implicated in the overall organization of Nakarattar business activity during the colonial period. They were not, in general, independent economic or even residential units. Most of their properties and business activities were held as part of the undivided estate of a valavu , the Nakarattar joint family unit to which the pulli belonged.^[9]

Although each pulli had its own living quarters and cooking hearth, they traditionally shared a common family house with other pullis belonging to the larger valavu .^[10] Thus it is more accurate to view the traditional pulli as a hearthhold rather than a household. Its characteristic activities were oriented around procreation and consumption. Even the vaunted personal allowances to individual pullis were not made on a cash basis, but were charged to the pulli's account with its valavu . These accounts were not reconciled until partition of the valavu. At this time debits and credits in the pulli's account were justified just like any business account, and the differences adjusted against the pulli's share (panku ) of the estate. Moreover, no important decision was independently made by the head of a pulli . At the very least, he had to ask the approval of the head of the valavu , who had veto power and commonly acted as an active manager and director of all business activities by members of the valavu .

The term valavu literally denotes the architectural portion of a Nakarattar house, consisting of a central courtyard and the surrounding ring of rooms housing each of the resident pullis (see Plates 9–10). This usage was extended to apply to the undivided, extended joint family, usually containing several pullis and sometimes covering three or four generations.^[11]Valavu members were traditionally coresidential, an enormously sensible practice, especially during the period when Nakarattars carried out the bulk of their business abroad. At that time, a young man commonly left his wife and children in the care of his father and brothers and

worked abroad for a period of three years as an agent, either for his own family's banking firm or for another family's firm. Later, after he had established his own business, he might occasionally go on a short tour of his branch offices.

Within a Nakarattar valavu , it was the oldest adult male who presided over major decisions affecting its members. Respect for his leadership was marked. Even men of forty or fifty years, with a record of successful business enterprise in their own right, deferred to the decisions of the eldest male until he voluntarily stepped down. In many families, they would neither speak nor sit in his presence. Nor would they undertake any major private undertaking without his permission.

This is not to deny the tremendous pressures operating upon married males of the family to claim their panku (share) of the family estate and establish their own separate family unit. In some cases, these pressures were expressed by the rapid partition of the family soon after the death of the male head. Occasionally, friction between brothers was so great that one or all of them demanded their shares when their father was still alive. In the family of a contemporary Nakarattar industrialist, tension erupted when the youngest son (a man in his late thirties) sought independence from his father and his oldest brother, who had already assumed most of the decision-making activities for the joint estate. The tension escalated to the point where the brothers engaged in public brawls, and the youngest brother was even rumored to have hit his father. Ultimately, the estate was partitioned. The brothers received ownership of separate industrial companies that had been part of the common estate. Both brothers continued to live in houses constructed in the compound of their father's residence in an urban center outside of Chettinad. But they refused to speak to each other or attend the marriages of each other's children.

Nevertheless, this extreme tension represents an exceptional case. It was far more common for a valavu to approach the Nakarattar ideal and remain together as a three- or four-generation unit under the leadership of its eldest male. The typical pattern is illustrated by the recent history of the family of a major Nakarattar banker, industrialist, and philanthropist. When he died, overall control of the family enterprises devolved upon his eldest son. Strains for partition were kept in check by family politics and by appeals to the Hindu ideal of the joint family. When the son himself died, however, the joint family ideal fell into conflict with equally potent preferences for direct lineal inheritance. Under the classical model, the son's younger brother—who succeeded to the position of oldest male in the extended family—could have been expected to assume overall managerial responsibility (Tambiah 1973b). However, the son's own son,

named after his grandfather, had been trained in modern business management in America and had been deeply involved in family decision making processes even before his father's death. He and his uncle differed radically in their views about appropriate investment policy, about other aspects of business management and operations, and about the management of family-directed colleges and other philanthropic activities. These disagreements led to protracted arguments, negotiations, lawsuits, and ultimately to partition of the family's assets. Until partition, however—and in contrast to the case of the exceptionally divided family described above—this more cohesive family illustrates how the joint family ideal was able to counter competitive tendencies among brothers even after the death of their father. On the other hand, this solidarity in the conjugal family was not sufficient to counter competition between collaterals in different generations—in this case, between father's brother and brother's son.

Considerations such as these make it seem likely that the Nakarattar domestic-cum-business developmental cycle was different from domestic cycles of kin groups based on reproductive conjugal units like the Nakarattar pulli or the American nuclear family. Unlike such typically studied cases, in which parents are replaced by children (Benedict 1968; Goody 1958), the Nakarattar valavu was a purely productive unit in which brothers replaced each other in order of seniority. Both kinds of developmental cycles are influenced by the biological facts of birth, maturation, old age, and death. But the Nakarattar cycle involved a larger unit of organization and a longer period for the full cycle. In addition, the cycle of partition was affected by the death of the eldest male in a way that differed markedly from developmental cycles in kin groups based on the conjugal unit. The entire issue contains considerable scope for further research. The lesson in the present context, however, is the important role of the valavu as the basic unit of Nakarattar business ownership: the Nakarattar family firm.^[12]

Proprietors and Agents

Despite occasions when a hearthhold component of a joint family seemed to act independently—either as an expedient legal fiction or as a sociological fact due to internal friction within a family—the chief locus of Nakarattar decision making remained the joint family, with its senior male as proprietor of the family firm. In business dealings, he was normally referred to as mudali ("principal"). In general, proprietors left the daily operation of their overseas business firms to hired agents (melals ) and field staff (kattu kanakkupillai ) while they stayed in India. Nevertheless, proprietors maintained a continual correspondence with their over-

seas agents, and many of them made periodical tours of inspection. While in India, proprietors were engaged in a constant round of marriages, funerals, village festivals, and other social functions, during which time they compared business notes with their fellow bankers, discussed investment opportunities, sought information about changing government policies, and simply kept track of each other's success, failure, and overall creditworthiness.

Before the 1930s, most Nakarattar bankers received a specialized training for their profession from an early age. As young boys, they learned multiplication tables and memorized formulas for computing compound interest in a traditional Tamil style on the verandas of their Chettinad homes, probably from a member of their family. From about the age of ten, they learned how to make ledger entries in a business ledger/journal (peredu ) with information received periodically from the family's business office(s ) overseas. Before reaching his teens, a boy left his Chettinad home and was apprenticed for three years as an errand boy (pettiyadi paiyan ) to his family's business agent in a business office abroad. He returned home wearing gold rings, diamond earrings, a gold chain, and a gold belt. And he carried with him all the talismans of his trade: gold coins, diamonds, gems, pearls, rubies, and topaz.

After a short period of reunion with his family and friends, a young Nakarattar man was considered ready to undertake direction of a banking agency on his own. But, on his first time out, he seldom would be put in a charge of a business office belonging to his own family's firm. Occasionally, he might find employment as agent for the branch office of a family in a segment of the patrilineal descent group (kuttikkira pankali ), which consisted of his own joint family plus close collateral families, usually headed by the brothers of his father or paternal grandfather. Sometimes, however, animosity left over from divisive family partitions prevented this form of cooperation between collateral families. Accordingly, in much the way that Nakarattar parents sought families with which to establish a marriage alliance for their daughters, they sought families who would employ their sons and thereby establish a business alliance. In fact, the two quests were intimately related. In-laws—especially maternal in-laws (tayatis )—were often approached as potential employers. Their firms were well known. They could be counted on to feel some responsibility toward their daughter's husband. And they were, themselves, in a good position to evaluate the trustworthiness of their son-in-law. Often, the connection between ties of interfamilial employment and those of marriage alliance served both functions simultaneously, since successful agents were frequently approached as possible grooms for the proprietor's

daughters even where no previous alliance had existed. Both quests were the topics of discussion among Nakarattars gathered together for weddings, funerals, and village ceremonies. And young men in search of their first business agency were evaluated on the basis of their potential business acumen and their potential for linking two families in a mutually beneficial marriage alliance.^[13]

Agents were not always young boys. More experienced men were often hired, particularly in the case of important agencies. Such men normally had run agencies before or had owned their own businesses but, for whatever reason, during the time in question had insufficient funds to operate their own businesses. Alternatively, but rarely, such men might be acting as their own agents and in this situation found themselves in positions to act as agents for other firms as well. In some cases, especially trusted non-Nakarattars would be hired, but this was rare.

An agent was usually appointed for a three-year tour of duty called a kanakku (an "account"). Salaries were negotiated by the proprietor through intermediaries and, in the 1930s, ranged from 800 to 6000 varakans (one varakan = Rs. 3.5) depending upon the turnover of the firm and the experience of the agent. Fifty percent of the estimated salary for the three-year period was remitted to the agent's family immediately upon his departure for the business station. The remainder was paid to the agent in the form of living expenses during his period of employment and, at the end of the kanakku , as a bonus in the form of a share of the profits. My informants estimate that in Malaya, for example, the agent's share was 4 percent on plantation income, 4 percent on rental income, and 6–10 percent on income derived from banking business. In some instances, it was possible for an agent to negotiate shares of up to 12.5 percent of the business.

Just before his departure, the agent visited the proprietor at his residence in Chettinad. There, he signed a contract of appointment (basically, an indemnity bond) and received power of attorney to act as the proprietor's agent in the field. As in contemporary America, there was some flexibility in specification of the agent's powers, the precise terms varying from case to case. But in general he was given the powers to buy and sell property, to discharge mortgages, to draw loans, and to engage or discharge employees.

The agent and the proprietor then proceeded to the proprietor's family deity and together worshipped the deity and asked for blessings. Afterwards, the proprietor gave the agent oral instructions concerning the conduct of business, the handling of finances, relations with competing firms, and dealing with the Nakarattar adathis who acted as clearinghouses for

the majority of Nakarattar transactions. Collecting expenses for travel in advance, the agent proceeded to his port of embarkation, perhaps taking with him a letter of introduction to an adathi —an elite Nakarattar banker with vast financial resources—who maintained among his many branch offices a local office at the agent's port of departure. Agents leaving for Burma usually left from Madras; for Malaya, from Nagapattinam or Madras; and for Ceylon, from Tuticorin or, after 1914, from Dhanuskodi.

On arrival at his destination port, the agent worshipped at the local Nakarattar temple and dispatched telegrams to his family, to the proprietor, and to the agent he was to replace at his firm's business office. He then proceeded on the next leg of his journey to reach the business office, normally located at a railway station or river port in the interior of the foreign country in which he was to spend his next three years. On arriving at his office, he was welcomed by all the resident Nakarattars, eager for news from Chettinad. His arrival was celebrated by a short commensal meal and was followed by a collective visit to the local temple for worship.

On the first day determined by horoscope to be auspicious, the new agent formally took charge of the business office from the retiring agent. He was presented with what my informants described as the firm's "general ledger" (peredu —but see Chapter 5) as well as the agency's other books of account, and he was introduced to the firm's clients on their business premises. The retiring agent would call in as many loans as possible to give the new agent the maximum freedom to invest at his own discretion. He then reviewed the outstanding loans with the new agent. Debts from sound clients were listed in one ledger (pekki pustakam ) and considered as secured loans and good investments. Debts felt to be bad risks were listed in a separate ledger for collection by the new agent, but the old agent was held liable for them. Both agents checked the balances outstanding with the firm's clients and issued new receipts to the clients signed by the new agent.

When all this was accomplished—a process that could take up to six months—the retiring agent was ready to depart. The new agent certified the retiring agent's bonus calculated at the agreed-upon percentage of the firm's profits over the three-year period of his appointment. If the new agent was not prepared to accept a debt as a good risk, the matter might be settled by intervention of agents from other firms who would agree to take on the debt. If this was not possible, the matter was left for three years until the new agent himself returned to Chettinad.

On reaching India, the retiring agent went straight to the proprietor's residence with all of his baggage. The proprietor had the right to confiscate any of the agent's belongings. The agent then gave the proprietor all of the

letters written to him by the proprietor while he was in the field. Afterwards, he proceeded to his own village. For the next few weeks and during the next marriage season, he would be the center of village gossip, especially about his improved financial status and the benefits of a marriage alliance with his family.

If an agent's tenure was successful, he would be called upon by the proprietor to help bring duplicate ledgers up to date, and to advise the proprietor on the best course of action to take during the upcoming three years. If a retiring agent was not in a position to start his own firm, the proprietor might make arrangements to engage him again as agent at the same business office or at another location. As a measure of trust, the agent's power was generally increased by removing any restrictions that might have been placed on the power of attorney granted him during his first appointment. In addition, his bonus would most likely be increased by agreeing that he should receive a larger share of the profits from his agency.

The Nakarattar Agency

Nakarattar agents conducted their business out of modest offices called kitangi or arai normally located in a communal building housing both the offices of other Nakarattar bankers and also a communal temple (kovil ) or rest house (vituti, chattiram , or choultry ). The offices were quite small—perhaps eight feet by four feet of floor space—and contained a wooden box or low desk which held cash, jewels, business papers, correspondence, account books, and a pair of scales. The agent's responsibilities consisted in making daily visits to the local Nakarattar temple; keeping track of cash positions and requirements by reviewing the day book (kurippu ); corresponding with the firm's proprietor; keeping track of exchange rates, commodity prices, and local governmental laws and policies; representing the proprietor at community meetings; and upholding the reputation of the firm by entertaining guests in as lavish a manner as possible.

The bulk of work in running an agency, however, was actually carried out by a staff (kattu kanakkupillai ) consisting of a first assistant (mudalal ), subordinate staff (aduthal ), a cook (camaiyalkaran ), and an errand boy (pettiyadi paiyan ). Large firms also frequently retained a court clerk (kirani ) and a cashier. None of these employees needed to be Nakarattars. The first assistant was responsible for initiating choice of clientele. In many cases, he did practically everything else as well, and even checked the cash locked in wooden chests before handing over to the agent the key to the kitangi and closing up shop for the day. Field staff were the only employees necessarily fluent in the local language. In Burma, they visited clients in their own houses, inspected lands owned by the

firm and leased to clients, maintained good relations with village officers, and saw to it that land records were kept in good order. In Malaya they visited tin mines and rubber estates owned by the firm and oversaw salary advances and loans to laborers and other employees. In urban areas, where the agency made unsecured loans to retail shopkeepers and small-scale traders on a kandu kisti basis,^[14] the field staff made daily rounds to collect repayment on these loans. The subordinate staff were generally clerks who kept ledgers, made copies of weekly statements, kept petty cash accounts relating to staff meals, and attended to simple registration work required by notary publics, income taxes, and other bureaucratic duties. They also drafted documents, agreements, and contracts with solicitors and insurance companies. Large agencies were often massively involved in litigation and employed separate court clerks for this purpose. The court clerk was responsible for all of the paperwork transacted in the various subcourts, district courts, and high courts of the country of business. Suits were filed mostly against Burmese, Malayan, and Chinese clients. Occasionally there were suits against other Nakarattar firms, suits for the dissolution of a partnership between a proprietor and his son, and appeals against orders brought by civil or revenue authorities. Large banking houses also kept full-time cashiers. All agents employed cooks to provide meals for themselves and their staff. The cooks were normally recruited from the Mukkulatar castes of Chettinad. Finally, Nakarattar agencies also employed an errand boy, or "bearer boy," who kept cash at the counter and ran personal errands for the rest of the staff. An errand boy was entrusted with considerable financial responsibility. He might be sent to other business houses to borrow, loan, or pay back tens of thousands of rupees without any documentation. This money was called kaimattu panam (hand money). The errand boy held the lowest position in the agency. He received almost no salary beyond room and board and a small bonus at the end of his appointment. But he did receive an excellent training, and most Nakarattars started their banking careers as errand boys. Moreover, an appointment as errand boy provided a young man with an important opportunity to make business contacts that would serve him well during his first tour of business as an agent in his own right.

Adathis : The Nakarattar Elite

Nakarattar firms were distinguished by the size of the business they controlled. Thus, according to several of my informants, there was a basic distinction between the majority of Nakarattars, whose business was confined to a single geographic arena (Burma, Malaya, or Ceylon, but not more than one), and the relatively small number of adathis , who were

spoken of as "important men" and who controlled wealthy "parent banks" and managed business enterprises throughout South and Southeast Asia. Another important distinction which cut across the distinction between adathis and other Nakarattars was between independent businessmen, who controlled their own enterprises, and "minor families," who left decision making in the hands of trusted independent bankers who were normally adathis .

It is difficult to judge the percentage of total Nakarattar firms that constituted adathi firms. On one hand, my informants estimated their numbers at between 5 percent and 10 percent. This seems consistent with the number of Nakarattars who obtained title to zamindari lands in Madras (Chapter 4). On the other hand, this estimate seems somewhat high measured against indices of the internal stratification of Nakarattars doing business in Burma (their primary place of business). One useful index is provided by figures on Nakarattar land ownership in Burma. These figures were submitted in 1953 to the chargé d'affairs of the Indian embassy in Burma as part of a Nakarattar effort to gain compensation for lands lost when they were expelled from Burma. I have broken down the figures arbitrarily into larger clusters based on the size of the landholding and have calculated the percentage of Nakarattar firms that fall into each cluster (Table 8). I emphasize that this clustering is undertaken only to highlight patterns in land ownership. Although there is a marked internal stratification by land ownership, there is—with the exception of what I take to be a segment consisting of (although not necessarily exhausting) Nakarattar adathis —no evidence that the clusters correspond to a hierarchy of exclusive or self-conscious social classes.

A corroborating index of stratification is provided by the numbers of branch offices or agencies held by different Nakarattar firms (Table 9). I take the twelve largest Nakarattar landowners as representing (if not exhausting) Nakarattar adathis in Burma.^[15] If adathis are defined by their ability to transmit funds between regions, then it is not inappropriate to extend the set to include the twenty or so firms that maintain at least half a dozen offices in Burma. In any case, many of the firms in one or both of these groups seem to possess traits besides wealth in land that my informants indicated were also constitutive of adathi status. They maintained multiple branch offices throughout Burma. The twelve largest landholders all served as Nakarattar representatives on the Indian Chamber of Commerce in Burma.^[16] Six with whom I am familiar from my field work had business offices and investments in India as well as Burma, and some of these were involved extensively in Ceylon as well. Most of these Nakarattar proprietors served as officers of various caste organizations (e.g., as

administrators for Nakarattar vitutis —see below) and in locations where they did business. They or members of their families frequently held political office in Burma, India, or Ceylon. Finally, all members of this group of notables were likely to have been major contributors and to have served on boards of trustees for temples and for charitable or educational institutions. In other words, this small group of Nakarattar notables formed an elite group of interlocking connections and influence among the business, governmental, social, and religious institutions of Asian society.

Adathis operated with a large working capital of their own. In addition, they had access to deposits, loans, overdraft privileges, and other sources of credit from the Imperial Bank of India, from European commercial banks, from recognized banking houses owned by members of non-Nakarattar castes such as Marwaris, from religious and charitable endowments, and from other Nakarattar bankers. The importance of these resources was considerable-especially the importance of loans made available to adathis by the European banks. According to A. Savaranatha Pillai, Assistant Commissioner for Income Tax of Madras in 1930,

Besides deposits that Chettis receive from members of their own community and from the public and the loans taken from the Imperial Bank, they also borrow money from other banks—the National Bank, Mercantile Bank, Hongkong and Shanghai Bank, the Chartered Bank, the P. and O. Bank, Yokohama Specie Bank, the Lloyds Bank. The total amount so borrowed is not known. The extent to which each individual Chetti borrows depends on his personal capacity, the favor he finds in the eyes of bank authorities. There are instances in which some Chettis have managed to get a borrowed capital ten times as great as their own capital. There are many cases in which borrowed capital is up to 2 1/2 times of their own capital. Taking Chettinad as a whole the borrowed capital comes to about 50% of their own capital with reference to the estimates made by the [Income Tax] officers having jurisdiction over the area. (Pillai 1930: 1180)

Pillai was apparently unaware of the correlation between adathi status among Nakarattars and creditworthiness of individual Nakarattars among Europeans. But my informants were emphatic that only major, adathi houses were favored with access to loans from European banks.^[17] Thus, the huge amount of funds that Pillai describes as available to Nakarattar bankers was actually channeled through an extremely small cadre of very powerful men.

Besides these advantages, adathis also had access to other sources of funds denied smaller-scale Nakarattars. While all Nakarattars transacted hundis (bills of exchange), adathi firms acted as clearinghouses: if a non-

adathi or even a non-Nakarattar wished to remit money from his overseas business operations, he could draw up a hundi , much the way Americans write checks, and have it cashed by an adathi with whom he maintained an account. Nakarattar hundis could be used much as bills of exchange are used in commodities transactions and also—uniquely—as interest-bearing certificates of deposit. In either case, hundis drawn on adathis had special value relative to those drawn on non-adathi firms. They were widely negotiable and liquid at almost any time—more so than hundis drawn by non-adathis . Accordingly, they would frequently be kept uncashed as insurance against a time when cash was needed on short notice. One consequence of this was to provide still further resources to adathis , who could count at any time on high demand but low turnover for bills drawn on themselves. Moreover, because hundis drawn on adathis were such a good risk, they provided for quick and easy remittance of funds from Southeast Asian business operations to India. Adathis maintained offices all over Chettinad and in the major ports where Nakarattars did business: Madras, Nagapattinam, Tuticorin, Calcutta, Colombo, Rangoon, Penang, and Singapore. The smaller Nakarattar firms maintained accounts with adathis who kept offices in their primary places of business as well as offices in Madras and, perhaps, offices close to their native villages in Chettinad. According to Pillai, the efficiency of hundi remittance through the adathi system contributed to the large proportion of Nakarattar capital maintained overseas: "When funds are required for local requirements [in India] the Chettis draw upon their adathis in Madras. A telegram before 3 o'clock brings them money by next post." (1930: 1180). As a consequence, Nakarattars were freed from the necessity of maintaining liquid capital in India, where it was highly taxed, and could deploy their investments in the far more profitable arenas of Southeast Asia.

Finally, Nakarattar adathis also served as political leaders on municipal and district boards, as mayors of cities that served as provincial capitals, as members of legislative councils, and as chairmen and members of the boards of trustees for temples and other charitable institutions in local communities wherever they did business. Such forms of public and religious service made their own distinctive contributions to an adathi 's overall ability to control wealth, although the available data do not allow one to judge the incremental advantages to adathi resources beyond those extended directly or indirectly to nonelite Nakarattars.

In other words, although all Nakarattar firms acted like commercial banks—making loans, taking deposits and so forth—Nakarattar adathis acted like reserve banks for the Nakarattar banking system as a whole. By gaining and controlling access to financial resources outside the system,

adathis directly affected money supply. As influential voices in regional interest-setting meetings (see below), adathis not only affected the cost of regional systems of credit, but also helped to standardize interest rates across the multiple regions in which they did business. Adathis served as clearinghouses for bills of exchange transacted across the entire sphere of Nakarattar enterprise. Finally, consciously or unconsciously, adathis created a major impact on local and regional credit markets by using the massive capital resources at their disposal—an impact similar to that created by a central bank's open-market operations.

Nakaravitutis

When a Nakarattar businessman entered a local business community for the first time, his fellow Nakarattars welcomed him by hosting a commensal meal for him and by joining with him to worship at the local Nakarattar-supported temple. These welcoming rituals symbolized Nakarattar conventions of friendship and business morality that carried over into extensions of financial trust and credit to one another and to non-Nakarattars for whom they accorded preferred, semi-Nakarattar status. Business associates bonded by such communal relationships were granted lenient terms with respect to overdraft privileges or loans on minimal or no security. This was especially true in the case of transactions that were between Nakarattars, which were recorded in account books on a mercantile or accrual basis rather than a cash basis. Transactions between Nakarattars were subject to justification only after many transactions, and the difference between deposits and withdrawals at any given time could be substantial. In other words, in addition to cheap loans and high interest payments on deposits, Nakarattars provided for each other relatively unlimited credit opportunities.

There were, nevertheless, several conventions built into the Nakarattar banking system that provided checks on the extent to which credit could be extended. These conventions also served to safeguard the moral obligation to extend credit from too strong a confrontation with private interests. The obligations and limits of cooperation among local communities of Nakarattar businessmen were formalized in the institutions of the nakaravituti and the panchayat . I have already commented on the function of nakaravitutis in providing venues for regular meetings for setting standardized interest rates or reaching other collective decisions. These institutions also performed two other important functions: the facilitation of information and credit transfers, and the resolution of conflict.

Nakaravitutis (vitutis belonging to Nakarattars) were ostensibly community-supported lodging houses located in the same building as or adjacent to Nakarattar-supported temples. They were frequently referred to as

Nakarattar matams .^[18] On the first floor, they contained private rooms, dormitories, storage rooms, meeting rooms, dining halls, and (for those open to women) private kitchens. On the second floor each vituti contained a shrine or temple. The vituti was directed by a board of trustees and employed a manager and staff to provide services for traveling Nakarattars. These services included, in addition to provision of lodging and meals, provision of mailing facilities, making travel arrangements, clearing baggage at local customs houses, and arranging for absentee prayers at local temples. In short, vitutis were extremely useful in the mobile world of the Nakarattar.

Vitutis were normally financed primarily by large gifts or endowments (kattalais ) from wealthy Nakarattar adathis , although less-prominent Nakarattars with local interests frequently contributed to the endowment fund. Operating costs were also subscribed through endowment. Thus, many of the redistributive functions performed by endowment of temples and temple festivals (Chapters 7 and 9) were also performed by endowment of the closely associated nakaravituti . In addition, every guest paid what amounted to a nominal rent (called makimai , like the Nakarattar religious tithe) fixed by the manager of each vituti and subject to revision according to need. Where the vituti was associated with a pilgrimage site, women made additional payments to cover the cost of specific offerings to the deity (e.g., pal kattalai , "milk endowments"). Even when visiting Nakarattars chose not to stay at a local vituti , and stayed instead in the home of a friend or in an expensive hotel, they paid makimai .

Vitutis located in the villages of Chettinad were basically extensions of the major Nakarattar village temples and were used to conduct local community meetings or hold village-wide religious ceremonies. Such ceremonial pilgrim houses were generally not used as lodging houses. There was no need. They were paid for by all the Nakarattar families in the village, although the major cost would normally have been born by the dominant, wealthy family or families.

Nakarattar clan temples (nakarakkovil ) all had their own vitutis paid for by clan members; there were separate vitutis for men and women and, in some cases, additional vitutis for subclans. These vitutis were used as lodging houses by Nakarattars visiting the temple on business, such as to register a forthcoming marriage in the family or to pay arrears of temple dues. They were also used for general assemblies for clan meetings.

Nakarattars also built vitutis wherever they did business. After the opening of Madras harbor in the 1880s, one finds separate Madras vitutis built by Nakarattars of Devakottai and Karaikudi: the former to serve Nakarattars engaged in internal trade, the latter to house traveling

women. The Nakarattar Association of Tiruchirapalli also built a community lodging house in Madras, and Nakarattars who did business in Burma constructed the Rangoon nakaravituti there. Nakarattars who did business in Ceylon built a vituti in Tuticorin. The Nakarattar Association of Malaya built a vituti at Nagapattinam. And the Nakarattars of Singapore built a vituti at Penang. The cities and countries where all of these vitutis were located served as major markets for the groups who built the vitutis . Similarly Nakarattar businessmen constructed vitutis in every major place of business throughout Southeast Asia: in Colombo, Rangoon, Penang, Singapore, and so on.

Nakaravitutis were more than lodging houses. They were social institutions in which Nakarattars came together, exchanged information, and made interdependent decisions. As such, vitutis constituted corporate bodies whose officers represented the interests of local Nakarattar communities. Vitutis at major pilgrimage centers received contributions from Nakarattars and oversaw temple festivals funded by these donations—both annual festivals, such as those carried out since the seventeenth century at Palani (Chapter 7), and special festivals, such as Nakarattar-funded temple renewals (kumpapisekams ). Vitutis also undertook the feeding of large numbers of holy men and mendicants on such occasions, and of a fixed number of such people throughout the year. Unlike the private temples of Chettinad, however, nakaravitutis shared these honors with representatives from other communities who also participated in the ritual cycle of major Hindu pilgrimage centers.^[19]

At vituti -sponsored festivals and at more mundane convocations (such as weekly or monthly meetings to set interest rates), vitutis maintained a constant schedule of collective events in which their members came together and exchanged notes on business. As clearinghouses for information about each other and about business opportunities generally, these collective events effected investment decisions, including decisions about the optimum allocation of investment funds and the amount of credit to extend to a fellow Nakarattar. In other words, vitutis provided Nakarattars with access to information about each other's business. They provided opportunities to scout out investment opportunities and arrange for loans by fellow Nakarattars looking for investments. At the same time, the information they provided served as checks against incautious business behavior and unreasonable requests for credit.^[20]

Nakarattar Panchayats

Access to public information about each other's business also served to limit situations in which disputes might arise between Nakarattars due to

private misunderstandings. When such disputes arose (as they inevitably did), nakaravitutis , along with temples and (at one time) Saivite monasteries (matams ), provided venues for extraordinary meetings of the community to resolve disputes. These meetings were held under the jurisdiction of a respected elder or elders in the concerned community and were called panchayats —on the pan-Indian model—although disputes were typically mediated or arbitrated by a single person.^[21]

Little has been observed of Nakarattar panchayats in operation. They clearly served both religious and business functions and had long been associated with temples and with sectarian religious orders housed in Saivaite matams .^[22] But the basis for many of the disputes reportedly brought to panchayats seems to have remained constant. Among coparceners, for example, differences might arise over the provision for a widowed mother or unmarried sisters. Related disputes might arise regarding the payment of seasonal prestations (murais ) to married sisters. In both of these cases, the underlying basis for the argument would be strain between two or more brothers who maintained the traditional joint family for business purposes, but who were unable to arrive at a mutually satisfactory allocation of decision-making powers. In some cases the strain might become intolerable, especially to the younger brother, who would then press for partition of the family estate. If the disputes could not be resolved within the family, the matter might be taken to the village temple panchayat . Disputes between in-laws about dowry payments or treatment of the daughter and wife might be appealed to a clan temple panchayat if the families came from different villages. Other disputes between families from the same clan might also be resolved at a clan temple panchayat .^[23] In addition, panchayats were called in cases where the individual was seen as flaunting the rules of the community, for example, by refusing to pay a tithe for support of the community temple or, in principle, by marrying a woman from another caste.^[24] Finally, disputes between Nakarattar businessmen over payment of interest on loans, return of deposits, or other business matters might be appealed to a panchayat called at a temple in the place of business, in the men's natal village if they came from the same village, or at the men's clan temple if they were members of the same clan. It is not clear whether there was a pattern in the choice of venue. But, at least until the 1920s, if there was a dispute between Nakarattars from Devakottai over the honoring of a hundi , the matter was raised in Devakottai rather than in those places where the transaction had been carried out (Krishnan 1959: 65).

It is this case that perhaps most clearly illustrates the business value of Nakarattar techniques for conflict resolution. Nakarattar financial transac-

tions transcended local boundaries. There was no single local context in which Nakarattars did business and hence no single local temple to which appeal might be made for community sanction. By maintaining their own village-based and clan-based communal organizations in Chettinad, however, Nakarattars maintained a hold upon every member of their community, no matter where the person did business. Suppose that one Nakarattar refused to accept a panchayat decision about payment of interest owed on a hundi transaction. In some cases, a panchayat might decide to take action, such as prohibiting Nakarattar families from intermarrying with the offender's family until he complied with their decision. Whether or not such extreme measures were taken, news of his untrustworthiness would spread rapidly throughout the network of localized Nakarattar communities defined by temples and vitutis serving Nakarattar villages, clans, and business stations. No Nakarattar would do business with him. A major part of his working capital and an important and reliable source of liquid credit would be denied him. He would soon be out of business. Armed with these sanctions, Nakarattar communal organization remained strong and effective until the twentieth century, when changes in the apparatus of colonial government began to offer alternatives to and protection from collective caste action. But until incremental colonial governmental reforms took effect during the 1920s and 1930s, individual Nakarattars ensured themselves of access to the collective pool of Nakarattar capital by maintaining moral norms and institutional sanctions for business cooperation and caste organization.

Finally, notice that techniques of Nakarattar conflict resolution were by no means centralized under a single Nakarattar chief or an overarching Nakarattar caste panchayat .^[25] On the contrary, they were highly segmentary and context-sensitive, responding to various combinations of local interests generated in disputes between Nakarattars from different villages, different clans, and different business stations. This segmentary quality in no way prevented the caste from responding as a whole to the decisions reached by a panchayat meeting. But this is hardly surprising. The contribution of segmentary organizational mechanisms for maintaining collective action has been recognized since at least Evans-Pritchard's (1940) study of the Nuer (for further discussion of the specific Nakarattar construction of segmentary organization, see Chapter 9).

Collectivism and Capitalism

The introductory sections of this chapter outlined an argument begun in Chapter 5, that, contrary to Weber, magic and collectivism are not imped-

iments to capitalism. Indeed, they form the basis of a distinctive capitalist ethic in Hindu India. The body of this chapter has supported my contention by presenting information about the collective organization of Nakarattar capitalism. The following chapter addresses the capitalistic uses of magic. My purpose in all this, however, is not to add yet one more redundant criticism of Weber's analysis of Hinduism, but to reconsider the stress Weber places on the role of individualism in capitalist practice: a quality that anthropological and historical studies continue to install as the definitive element of true capitalism.^[26] Thus, as we saw in Chapter 3, many corrective interpretations of Indian economic history and Hindu business practice refute Weber by showing that Hindu businessmen are entirely capable of acting as individualistic entrepreneurs. Nevertheless, there is danger of throwing the baby of caste out with the Weberian bath water. Not all Hindu business practice was individualistic. In many cases, castes did function corporately, not in the way envisioned by Weber, but in other ways that are poorly understood because almost no one considers them.^[27] In other words, there is a need to consider what kinds of collectivism may have been at work and may continue to be at work in Indian forms of capitalism.

A Weberian rejoinder might be that the traditional, collectivist orientation of Hinduism is precisely what prevented the extension of its capitalistic variants—represented by the Nakarattars—into the wider Hindu population.^[28] Such a rejoinder seems quite dubious, both in terms of documented capitalist formations throughout India and also in terms of some of the weakest links in Weber's argument. In regard to the first point, one need only look to the development of economic practice and organization among non-Nakarattar groups in India—including, in South India alone, Brahman castes (Krishnan 1959), castes specializing in craft production (Mines 1984), and agrarian castes (Hardgrave 1968). But besides this, Weber's own observation that modern capitalism is to be distinguished from other capitalisms (e.g., adventurer's capitalism or pariah capitalism) primarily by the presence of a completely organized work force (Weber 1958: 186, 271) combines with his scattered and insubstantial comments about the displacement of Protestant capitalism by modern, secular capitalism to weaken his argument (180–181). He gives no clear account of the processes of displacement, raising the possibility that non-Protestant ethics might, under appropriate conditions, also lead to a completely organized work force. Christopher Bayly (1989) makes a very similar point with respect to North Indian society. Given the Indian examples, it seems reasonable that whatever "nonreligious" forces extended the Protestant ethic to the entire society in Europe

might also be at work extending the Hindu capitalist ethic in India. And this suggestion, at least, offers us a modest point of agreement with Weber on which to end this chapter. For, in his more cautious moments, Weber (1958: 91, 183) insists that he was only exploring a set of conditions sufficient for the emergence of capitalism and that he was not making the claim that Protestantism was necessary, let alone necessary and sufficient.