'This bank remained the primary source of British finances for the second world war'
'Central banks have invariably been used by their governments to create money for war funding. Britain, in fact, was able to maintain its edge over its rivals like France in the 17th – 18th Century because it had a money-creating central banking institution the Bank of England, which others lacked. The official website of the Bank of England tells us that “It was primarily founded to fund the war effort against France.” The secret of Britain’s edge over France was quickly discovered by the latter. Thus, Fond Montyon, a senior civil servant in the French Finance Ministry, recommended in 1770 that France should adopt a similar mechanism by espousing the same institution.
“Great Britain finances by taxation neither all nor part of the costs of war, it finances them by loans and increases the annual tax burden only by the amount necessary to face the interest and redemption of the loan. That is the regime that France must adopt,” said Montyon.
In the same period the kings in the Indian subcontinent, fiercely resisting the increasing power of the British East India Company, mainly depended on the traditional methods of collection of taxes, gifts, and donations. They remained either oblivious of or abhorrent to the introduction of a central banking institution of their own and were thus beaten at the hands of the Company. Americans, on the other hand, established their first de facto central bank, the Bank of North America, in Philadelphia in 1781, and the war of independence, they were fighting against the British, settled in their favor in two years.
When and why was the first bank established in India?
Up until the British interventions, plenty was evident in India everywhere, especially in the eastern province of Bengal (Now Bangladesh and the Indian states of Bengal, Bihar, and Odisha), which later had to become the first seat and stronghold of the British in the subcontinent. “This was a time when India accounted for around a quarter of all global manufacturing. In contrast, Britain then contributed less than 2% to global GDP,” according to William Dalrymple. About Bengal, Madhusree Mukerjee reports on the authority of physician François Bernier who arrived there in late 1665 that Its rice traveled to Sri Lanka (called Ceylon by the British), and the Maldives, its sugar to Arabia and Mesopotamia, and its silks to Europe; ships at its ports were loaded with such exports as wheat biscuits and salted meats, opium, varnish, wax, musk, spices, preserved fruits and clarified butter. The currency in circulation was the silver coin Sikka, but before the British rule, the Moghul king’s viceregent, the Nawab of Bengal used to collect taxes as a proportion of the produce, in kind, not in currency. This meant that if due to vagaries of nature, the peasants produced less, they had to pay proportionately less tax. If they could grow nothing, the government would support them from the produce of the charitable farms attached to temples and mosques.
Things changed utterly, once the East India Company took over Bengal. They were now, not allowed to pay their taxes in kind as a portion or percentage of their produce. They were required to pay a “fixed rent” in silver. The demand for silver coins during the revenue collection season resulted in complete drains of the available currency. The peasants had plenty, in the form of grains but were unable to pay the revenues. Default in timely payment of taxes now was fraught with severe consequences. The Company’s revenue collectors, would strip naked their wives, drag them from their homes, “put the nipples of the women into the sharp edges of split bamboos and tore them from their bodies” as Burke stated in some of the most sensational testimonies of the time. As a result, the farmers had no option, but to sell their produce at a throwaway price for silver coins to middlemen, which then supplied it to the British, getting the reward for their service in the form of some profit. The British still got the produce extremely cheap, and even an ordinary British soldier was able to make a personal fortune in India.'
Read more: The British Empire Created the Reserve Bank of India, as a “Sheathed Weapon,” Used to Fleece Indian Wealth