This Day in History (16-Feb-1659) – 1st known cheque (£400) (on display at Westminster Abbey)

There are early evidences of using cheques. In India, during the Mauryan period (from 321 to 185 BC), a commercial instrument called adesha was in use, which was an order on a banker desiring him to pay the money of the note to a third person, which corresponds to the definition of a bill of exchange as we understand it today. During the Buddhist period, there was considerable use of these instruments. Merchants in large towns gave letters of credit to one another. In early 1500s, the check first got widespread usage in Holland. Amsterdam in the sixteenth century was a major international shipping and trading center. People who had accumulated cash began depositing it with Dutch “cashiers,” for a fee, as a safer alternative to keeping the money at home. Eventually the cashiers agreed to pay their depositors’ debts out of the money in each account, based on the depositor’s written order or “note” to do so.

The first known handwritten cheque in Britain was signed in 1659 on this day. It was made out for £400, signed by Nicholas Vanacker, and made payable to a Mr Delboe and drawn on Messrs Morris and Clayton, scriveners and bankers of the City of London. The world “check” also may have originated in England in the 1700s when serial numbers were placed on these pieces of paper as a way to keep track of, or “check” on, them. As checks became more widely accepted, bankers encountered problem of collecting the money due from so many other banks. At first, each bank sent messengers to the other banks to present checks for collection, but that meant a lot of traveling and a lot of cash being hauled around. The solution to this problem was found at a British coffee shop. The story goes that a London bank messenger stopped for coffee and noticed another bank messenger. They got to talking, realized that they each had checks drawn on the other’s bank, and decided to exchange them and save each other the extra trip. The practice evolved into a system of check “clearinghouses”—networks of banks that exchange checks with each other—that still is in use.

The use of cheques peaked in 1990 but has dropped significantly since being partly replaced by electronic payment systems. Today two-thirds of under 25s have never written a cheque.



This Day in History (27-Jan-1921) – The Imperial Bank of India (State Bank of India) came into existence

The evolution of State Bank of India can be traced back to the first decade of the 19th century. It began with the establishment of the Bank of Calcutta in Calcutta, in 1806. The bank was redesigned as the Bank of Bengal, three years later. It was the first ever joint-stock bank of the British India, established under the sponsorship of the Government of Bengal. Subsequently, the Bank of Bombay (established in 1840) and the Bank of Madras (established in 1843) followed the Bank of Bengal. These three banks dominated the modern banking scenario in India, until when they were amalgamated to form the Imperial Bank of India, on 27 January 1921, with combined role of a commercial bank and a central bank.

However, with the establishment of the Reserve Bank of India in 1935, the Imperial Bank ceased to have a central banking function. It now became a purely commercial bank and certain business restrictions on it were removed. An important turning point in the history of State Bank of India is the launch of the first Five Year Plan of independent India, in 1951. The Plan aimed at serving the Indian economy in general and the rural sector of the country, in particular. Until the Plan, the commercial banks of the country, including the Imperial Bank of India, confined their services to the urban sector. Moreover, they were not equipped to respond to the growing needs of the economic revival taking shape in the rural areas of the country. Therefore, in order to serve the economy as a whole and rural sector in particular, the All India Rural Credit Survey Committee recommended the formation of a state-partnered and state-sponsored bank. The committee proposed the take over of the Imperial Bank of India, and integrating with it, the former state-owned or state-associate banks.

Subsequently, an Act was passed in the Parliament of India in May 1955. As a result, the State Bank of India (SBI) was established on 1 July 1955.  Later on, the State Bank of India (Subsidiary Banks) Act was passed in 1959. The Act enabled the State Bank of India to make the eight former State-associated banks as its subsidiaries, with the State Bank of Hyderabad becoming the first subsidiary of the SBI.


This Day in History (31-Dec-1695) – A window tax is imposed in England, causing many shopkeepers to brick up their windows to avoid the tax

Window tax was introduced in England and Wales in 1696 under King William III. It was designed to impose tax relative to the prosperity of the taxpayer, but without the controversy that then surrounded the idea of income tax. At that time, many people in Britain opposed income tax, because they believed that the disclosure of personal income represented an unacceptable governmental intrusion into private matters, and a potential threat to personal liberty.

When the window tax was introduced, it consisted of two parts: a flat-rate house tax of 2 shillings per house (equivalent to £12.11 in 2014), and a variable tax for the number of windows above ten windows in the house. Properties with between ten and twenty windows paid a total of four shillings, and those above twenty windows paid eight shillings. The flat-rate tax was changed to a variable rate, dependent on the property value, in 1778. People who were exempt from paying church or poor rates, for reasons of poverty, were exempt from the window tax. Certain rooms, particularly dairies, cheeserooms and milkhouses were exempt providing they were clearly labelled, and it is not uncommon to find the name of such rooms carved on the lintel. The bigger the house, the more windows it was likely to have, and the more tax the occupants would pay.

Architects responded to the tax by designing houses with fewer windows, and careful or impecunious householders bricked up some existing windows. As early as 1718 it was noted that there was a decline in revenue raised by the tax due to windows being blocked up. In 1851, it was reported that the production of glass since 1810 remained almost the same despite the large increase population and building of new houses. The complaints from the medical profession and enlightened individuals rapidly grew as the industrial revolution and urbanisation created mass housing and crowded cities, and raised the spectre of epidemics. They argued that the lack of windows tended to create dark, damp tenements which were a source of disease and ill-health. The campaigners argued that it was a ‘tax on health’, and a ‘tax on light and air’, as well as being an unequal tax with the greatest burden on the middle and lower classes. The campaigners eventually won the argument and in 1851 the Act was repealed and replaced by a house tax.


This Day in History (28-Oct-1929) – Dow Jones plummets 13% on Black Monday

Between 1924 and 1929, the Dow Jones Industrial Average quadrupled. At that time, it was the longest bull market ever recorded. By 1929, 2 out of every 5 dollars a bank loaned were used to purchase stocks. Market peaked on 3rd  Sep. In the last hour of trading on Thursday, Oct. 23, 1929, stock prices suddenly plummeted. When the closing bell rang at 3 p.m. people were shaken. No one was sure what had just happened. When the market opened again the next day, prices plunged with renewed violence. Stock transactions in those days were printed on ticker tape, which could only produce 285 words a minute. Thirteen million shares changed hands — the highest daily volume in the exchange’s history at that point — and the tape didn’t stop running until 7 PM. The following day, US President Herbert Hoover went on the radio, saying “The fundamental business of the country is on a sound and prosperous basis.”

And then came Black Monday. As soon as the opening bell rang on Oct. 28, prices began to drop. Huge blocks of shares changed hands, as previously impregnable companies like U.S. Steel and General Electric began to tumble. By the end of the day, the Dow had dropped 13%. So many shares changed hands that day that traders didn’t have time to record them all. They worked into the night, sleeping in their offices or on the floor, trying to catch up to be ready for October 29.

As the story goes, the opening bell was never heard on Black Tuesday because the shouts of “Sell! Sell! Sell!” drowned it out. In the first thirty minutes, 3 million shares changed hands and with them, another $2 million disappeared into thin air. Trades happened so quickly that although people knew they were losing money, they didn’t know how much. Brokers called in margins; if stockholders couldn’t pay up, their stocks were sold. So many trades were made — each recorded on a slip of paper — that traders  didn’t know where to store them – ended up stuffing them into trash cans. When the market closed at 3 p.m., more than 16.4 million shares had changed hands, using 15,000 miles of ticker tape paper. The Dow had dropped another 12%.

In total, $25 billion — some $319 billion in today’s dollars — was lost in the 1929 crash. The stock market wouldn’t recover to its pre-crash numbers until 1954.


This Day in History (13-Aug-1943) – Chintamanrao Deshmukh was first Indian to be appointed Governor of Reserve Bank

Chintaman Deshmukh had an outstanding educational career. He stood first in the Matriculation examination of the University of Bombay in 1912, and also secured the first Jagannath Sankersett Scholarship in Sanskrit. At the University of Cambridge in 1917, he graduated in the field of Natural Sciences Tripos with Botany, Chemistry and Geology, winning the Frank Smart Prize in Botany. He appeared for the Indian Civil Service Examination, then held only in London, in 1918, and topped the list of successful candidates. For most of his 21 years with the Indian Civil Service, Deshmukh was with the then Central Provinces and Berar Government where, among other things, he was probably the youngest among those who held the positions of Revenue Secretary and Finance Secretary. Chintaman Deshmukh’s association with the Reserve Bank of India began in July 1939, when he was appointed Liaison Officer in the Bank to keep the Government of India in touch with the Bank’s affairs. Three months later, he was appointed Secretary of the Central Board of the Bank and two years later in December 1941, as the Deputy Governor. He was Governor from August 1943 to June 1949.

Chintaman Deshmukh proved to be an outstanding Governor. He presided over the transformation of the Reserve Bank from a private shareholders’ bank to a nationalised institution and secured the enactment of a comprehensive legislation for the regulation of banking companies and the establishment of the first financial institution for the provision of long-term credit to industry, namely, the Industrial Finance Corporation of India (IFCI). He also initiated a number of steps for building up an adequate machinery for rural credit. Chintaman Deshmukh played an important role in the Bretton Woods Conference in July 1944, which lead to the establishment of the International Monetary Fund (IMF) and International Bank for Reconstruction and Development (IBRD). In both of these institutions, Chintaman Deshmukh was a Member of the Board of Governors for ten years and was the Chairman at the Joint Annual Meeting of these two institutions held in Paris in 1950.



This Day in History (27-Jun-1967) – The world’s first ATM is installed in Enfield, London

ATM Inspiration had struck Mr Shepherd-Barron, employee of  the printing firm De La Rue. while he was in the bath. “It struck me there must be a way I could get my own money, anywhere in the world or the UK. I hit upon the idea of a chocolate bar dispenser, but replacing chocolate with cash.” When Shepherd-Barron took the idea to Barclays, Barclays was convinced immediately. The then chief executive signed a hurried contract with Shepherd-Barron. The world’s first ATM was installed in a branch of Barclays in Enfield, north London.  Actor Reg Varney, from the television series ‘On the Buses’, was the first to withdraw cash. Shepherd-Barron’s machine used cheques that were impregnated with carbon 14, a mildly radioactive substance. The machine detected it, then matched the cheque against a Pin number.  The ATMS were at that time called DACS for De La Rue Automatic Cash System.

The machine paid out a maximum of £10 a time. The first machines were vandalised, and one that was installed in Zurich in Switzerland began to malfunction mysteriously. It was later discovered that the wires from two intersecting tramlines nearby were sparking and interfering with the mechanism. One by-product of inventing the first cash machine was the concept of the Pin number. Mr Shepherd-Barron came up with the idea when he realised that he could remember his six-figure army number. But he decided to check that with his wife, Caroline. “Over the kitchen table, she said she could only remember four  figures, so because of her, four figures became the world standard”.

Shepherd-Barron never patented his ATM invention, instead he decided to try to keep his technology a trade secret. The reasoning was that, applying for a patent would have involved disclosing the coding system, which in turn would have enabled criminals to work the code out.



This Day in History (5-Jun-1966) – Indian rupee devalued by 36.5 percent

Devaluation means officially lowering the value of currency in terms of foreign currencies. Devaluation is the result of official government action. Despite government attempts to obtain a positive trade balance, India suffered a severe balance of payments deficits since the 1950s. Inflation had caused Indian prices to become much higher than world prices at the pre-devaluation exchange rate. When the exchange rate is fixed and a country experiences high inflation relative to other countries, that country’s goods become more expensive and foreign goods become cheaper. Therefore, inflation tends to increase imports and decrease exports. Since 1950, India ran continued trade deficits that increased in magnitude in the 1960s. Another additional factors which played a role in the 1966 devaluation was India’s war with Pakistan in late 1965. The US and other countries friendly towards Pakistan, withdrew foreign aid to India, which further necessitated devaluation. Because of all these reasons, Government of India devalued Rupee by 36.5% against Doller, one of the largest devaluation.

Some key events in Rupees’ life

1947: Rupee tied to pound, Re 1 Rupee = 1 Pound

1966: Rupee was devalued by 36.5%. At that time Rs 4.76 = $1, after devaluation it became Rs 7.50 = $1

1971-1979: The Rupee is overvalued due to India’s policy of import substitution

1975: India links rupee with basket of currencies of major trading partners.

1991: Rupee devalued by 18-19 %

1993: Unified exchange rate: $1 = Rs 31.37

1993/1994: Rupee is made freely convertible for trading