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Caste as self-regulatory club: evidence from a private banking system in nineteenth century India

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  • NAIR, MALAVIKA

Abstract

The Chettiar banking system evolved and functioned in the absence of a government sponsored central bank in 19th-century India. I find that the underlying common social institution of caste was crucial for the workings of the banking system and effectively acted as a club. Exclusion was achieved by restricting membership by birth and the practice of endogamy. These mechanisms created the necessary incentives to provide meaningful rules as well as their enforcement. I describe and analyze the privately provided self-regulatory mechanisms of clearinghouses, inter-bank lending and information sharing. The Chettiar banking system thus adds to existing instances of self-regulated banking as well as points to the economic underpinnings of caste as an institution.

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  • Nair, Malavika, 2016. "Caste as self-regulatory club: evidence from a private banking system in nineteenth century India," Journal of Institutional Economics, Cambridge University Press, vol. 12(3), pages 677-698, September.
    • Handle: RePEc:cup:jinsec:v:12:y:2016:i:03:p:677-698_00
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    Cited by:

    1. Rania Adel Al-Bawwab, 2022. "The zecca mint: a self-enforcing monetary constitution in historic venice," Economics of Governance, Springer, vol. 23(1), pages 1-15, March.
    2. Lee Cronk & Athena Aktipis, 2021. "Design principles for risk-pooling systems," Nature Human Behaviour, Nature, vol. 5(7), pages 825-833, July.

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