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]