ABSTRACT
The unease in the autumn of 1864 and failures in 1865 were harbingers of much worse to come. There had been excessive confidence in India and the Far East during the previous few years which had been a time of good harvests, prosperous trade with great developments in the principle of limited liability, particularly in the business of finance.1 Although some measure of confidence seemed to be returning at the end of 1865, the exchange banks in Calcutta started recalling loans early in 1866. Early in March the Bank of Bengal placed severe restrictions, as a measure of caution, on the freedom of action normally exercised by its agents who managed branches in the cotton districts and, before the end of March, one leading exchange bank refused to lend money on government securi ties. Several mercantile houses followed this example. Early in April 1866, telegrams from England announced a serious fall in the value of cotton. The bazaar in Calcutta refused to make advances on any descrip tion of securities and many mercantile houses recalled their loans on government securities.2 By the first steamer which arrived there in April, exchange banks in China drew heavily on their Calcutta agencies at a much longer usance than usual and sight bills had to be met by forced sales of bills on Bombay branches of local banks.3
