A few months ago, Mint on Sunday editor Sidin Vadukut wrote about a visit to his home town of Thrissur for his younger sister's wedding. He mentioned that he met a neighbour who was proud that his daughter had recently joined a bank.

This piqued my curiosity. I asked the author whether the woman had joined one of the Thrissur firms, as I knew the region is home to quite a few local banks. He responded by asking why I don’t write about the same—and here we are.

Thrissur is home to three major banks—Catholic Syrian Bank, Dhanalakshmi Bank and South Indian Bank. These banks are currently classified as old private sector banks—they are among the few managed to survive in the private banking sector over the years. Their history is quite remarkable and needs to be discussed briefly.

Even before we discuss the histories of these individual banks, we need to discuss the history of banking in Kerala. It is intriguing to unearth how financial intermediation has existed in this part of the world much before banks came into being.

Edith Jemima Simcox (Primitive civilizations or Outlines of the history ownership in archaic communities, 1894), in a remarkable account on primitive civilizations, covers the region of Malabar along with other regions. She mentions that “the Dravidian kuri, or lottery, is said to have been handed down from very ancient times, and it is still commonly resorted to by anyone desiring to raise a sum of money for some special purpose, such as a daughter’s marriage". The second volume of the same book covers China, where she notes very similar arrangements were used to raise capital, prompting the author to add, “The resemblance to the Dravidian kuri, or lotteries, is obvious, and the institution in China may easily be as ancient as the characteristic form of mortgage also shared with the people of Malabar."

These kuris (more popularly known as chit funds today) evolved for over a thousand years and are perhaps the oldest forms of financial intermediation. They started as the Malabar region’s engagement in the spice trade over the centuries lead to the monetization of the economy. A mechanism was needed to transfer funds to those who needed it—as alluded to by Simcox. This led to development of the kuri system, where members got funds on a rotation basis. In the absence of collateral, kuri was an interesting way to transfer funds from surplus units to deficit units, which is seen as a major role of financial system as well.

W.E. Preston, who was member of Royal Commission on Indian Currency and Finance (1926), noted “... It may be accepted that a system of banking that was eminently suited to India’s then requirements was in force in that country many centuries before the science of banking became an accomplished fact in England."

Coming back to our topic, we zoom into the early 20th century, when Indians were establishing joint stock banks in different parts of the country. Under British India, the state of Kerala as we know it today was divided into three parts: Malabar in the north, Cochin in the centre and Travancore in the south. Malabar came under the Madras Presidency and the other two were princely states.

Within these three regions, a large number of banks mushroomed, most of them offshoots of existing kuri funds. There are multiple sources telling us about the high banking concentration in these three regions:

• The Travancore Banking Enquiry Committee's report in 1930 noted that nearly 190 banks were found to be functioning in the state in that year! Of the 190 banks, just six had paid-up capital of Rs1 lakh or more. Out of the 184 banks with capital less than Rs1 lakh, there were 10 banks with paid-up capital less than Rs1,000. The largest bank was the Travancore National Bank with capital of Rs1.5 lakh and the smallest was Catholic Little Flower Bank, with paid up capital of just Rs280.

• The Madras Banking Enquiry Committee (1930) noted that there were around 66 banks in the entire Presidency, with 32 of them in the Malabar region. Again, most of these banks were small.

• There was no separate committee to study banking in Cochin. However, the report of the Travancore-Cochin Banking Enquiry Commission (1956) noted that the princely state had 155 banks in 1936, which declined to 109 in 1939 and to 68 in 1954. The commission reported an even larger numbers of banks in Travancore: 274 in 1932-33, which declined to 85 in 1954. Whatever the sources of data, one thing is clear: these regions just had an amazingly high birth rate and death rate of banks.

Most of these banks turned out to be unstable and had to be closed. Kerala was home to two of the largest and most controversial banking failures in Indian history. The first was the Travancore and Quilon Bank in 1938 and the other was the Palai Central Bank. These banking shocks (along with other shocks like Partition) created enormous turbulence in Kerala’s banks.

Out of the nearly 1,700 banks that closed in the country in the period between 1913 and 1970, nearly 370 banks were from the Kerala region. This excludes some of the Malabar banks, which were counted as banks that closed in the Madras Presidency.

At the time of bank nationalization in 1969, there were 72 banks that had managed to survive in India. Of these banks, nine were from Kerala. And of these nine, four were scheduled banks and the other five non-scheduled banks. More importantly, seven of the nine banks were from the erstwhile Cochin state and within these seven banks, four were from Trichur (the anglicized name for Thrissur; I will use both).

Out of the nine banks, just four remain today, with three of them from Trichur. A remarkable feat, considering the fact that there are only 12 old private sector banks in India now. The Catholic Syrian Bank is about to celebrate its 100th birthday in 2020 and the other two are about to enter their 90s.

The sheer longevity of these banks is quite significant and demands adequate research. They remained small banks serving the hinterlands of Kerala. In 1969, the nine Kerala banks comprised just 1.8% of total deposits mobilized by all banks.

The next question is, why Trichur? The Cochin-Travancore Banking Commission's report noted that in Cochin “most of the banks were largely centred in Trichur, a commercial town with extensive rural areas lying all round which had also their banks".

In a rare study which looks at the history of one of the Thrissur banks—South Indian Bank—M.K. Das and Thomas E.M. (A Southern Odyssey: The Story of South Indian Bank, 2014) analyse some of the reasons for Trichur emerging as a banking centre. They say towns like Cochin or Mattancherry became important commercial centres due to favourable geography leading to trading opportunities in these towns. However, Trichur emerged as a trading town because of state patronage.

They highlight how Sakthan Thampuran, who was the king of Cochin between 1751 and 1805, shifted the capital from Mattancherry to Trichur. They cite the following reasons:

• Both the Dutch and British had bases at Mattancherry and were warring for supremacy. Sakthan did not want to take sides and shifted base to Thrissur.

• The other reason was the central location of Thrissur, which made governance easier in times where connectivity was poor.

• The third reason was strategic. Thrissur historically served as a gateway for enemy armies, whether they were the Zamorins of Calicut or Hyder Ali/Tippu Sultan. By shifting the base, he revealed the military strategist in him.

With the shifting of the political base, economic activity too began to shift towards Thrissur. The king promoted state trading in commodities, taking a cue from European traders. He built a small fleet of ships which he rented to private players, a forerunner to today’s coastal shipping activity. He also realized that many towns and villages of the state had product-specific markets. He ensured the prosperity of these markets by appointing officers to oversee the problems.

Given this policy push, Thrissur gradually evolved into a commercial centre. Thus, as joint stock banks started thronging the region, Thrissur became the default choice for most of promoters.

The earliest banks were mostly on community lines, which is in line with both the Indian and global experience. The Malayali Bank, promoted by Namboodiris, was the first such bank in 1919. This was followed by Chaldean Syrian Bank, named after Chaldean Christians of Thrissur. In 1921, C.R. Iyyunni, a lawyer and social activist, set up Catholic Syrian Bank. Tamil Brahmins of Thrissur formed their own Dhanalakshmi Bank in 1927.

South Indian Bank was an exception. The 42 businessmen who formed the bank did not want the bank to be affiliated to a community or religion. Thus, they chose the name “South Indian Bank" and registered it in 1929.

Thingalaya (Banks in the South: Past, Present and Their Future, 2009), in his exceptional work on India’s banking history, says that there were about 38 banks in Thrissur alone. Most of these banks were on community lines as their names indicate (Cochin Nayar Bank, Mar Appraem Bank, Mar Thoma Syrian Bank, etc.), some were dedicated to Hindu gods (Lakshmi Prasad Bank, Sree Radhakrishna Bank, etc.) and others were more generic (Bharata Union Bank, Cochin Reserve Bank, etc.). From these 38 banks, we have three surviving banks, which makes their overall achievement even more impressive.

The next question: how did these banks help Thrissur and Kerala? One way to assess this is to see the branch network of these banks in Kerala. In 1970, Kerala had 642 bank branches out of which 60% were from Kerala-based banks. Within the 60%, Thrissur-based banks constituted 22% of the total branches. In terms of population per branch, Kerala had 33,251 people per branch, which was the third-lowest amidst states after Gujarat and Punjab. The national average was 60,859 people per branch.

In 1972, when first district-wise banking data was released, there were 70 banked centres in Thrissur district, the eighth-highest in the country. More importantly, most of these banked centres were small rural centres with branches of local Thrissur banks. There were 133 functioning offices in the district, which was 17th-highest among all the districts.

In terms of total deposits and credit volumes, the district does not fare as well, given the banks were mainly catering to the small depositor and borrower. However, in terms of number of deposit accounts and credit accounts, the tally is impressive. The number of credit accounts was 118,000, 10th-highest in the country (three districts from Kerala were in the top 10), whereas the number of deposit accounts was around 240,000, making it 36th-highest in the country. The number of accounts again highlights that Thrissur banks mainly catered to small customers.

Apart from these inclusion parameters, these banks also provided employment opportunities to local people. Most of them were community banks as their names indicate, whose initial workforce mainly comprised members of their own communities.

***

After reading so much about banks in Thrissur, and poring over the data, one wonders just how many people know of its contribution to Indian banking history.

And it's not just about banks. One of the better known NBFCs (non-banking finance companies)—Mannapuram Gold Loan—also started in Thrissur in 1949. Not to mention the fact that it has become a hub for several jewellery companies—such as Kalyan Jewellers—which are now beginning to expand their footprint across the country. Gold and banking are, in fact, intrinsically connected as most of these banks lent against gold as collateral. Moreover, it is not just about the past: One of the 10 small finance banks—ESAF—started its journey in Thrissur and is now headquartered in Chennai.

There is so much to learn and understand about Thrissur’s emergence and sustenance as a financial hub over a small scale. I have barely scratched the surface and would be delighted to learn from those who know much more about banking in the region.

There was a reason I asked Sidin the “which Thrissur bank" question.

Amol Agrawal is a PhD student at IIM Bangalore working on Indian banking history. He writes a blog called Mostly Economics.

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