The Evolution of Banking and Financial Systems in Ancient India

Abstract

This paper examines the development and distinctive characteristics of banking and financial systems in Ancient India from the Vedic period (1500-500 BCE) through the Mauryan Empire and Gupta Dynasty (600 CE). Through theoretical analysis of primary textual sources, archaeological evidence, and secondary historical scholarship, this study traces the transformation from rudimentary barter systems to sophisticated financial institutions. The research reveals that Ancient Indian financial systems featured remarkably advanced concepts including standardized interest rates, financial contracts, credit instruments, and sophisticated monetary policies that supported extensive trade networks. This investigation demonstrates that Indigenous banking systems like the hundi (bill of exchange) and the institution of shroffs (money changers) represented significant innovations that facilitated both domestic and international commerce. The findings contribute to a more nuanced understanding of pre-modern financial history, challenging Eurocentric narratives and highlighting Ancient India's substantial contributions to global financial development.