UPSC Prelims 2020 Q25: Ancient History – Trade & Economy
- (a) An advisory issued by the king to his subordinates
- (b) A diary to be maintained for daily accounts
- (c) A bill of exchange
- (d) An order from the feudal lord to his subordinates
Answer: (c) A bill of exchange
Explanation
Hundi: Medieval Indian Financial Instrument
| Definition | Is it correct? |
|---|---|
| Advisory issued by king to subordinates | No - that's a royal order/firman |
| Diary for daily accounts | No - that's a ledger/bahi |
| Bill of exchange | YES |
| Order from feudal lord to subordinates | No - that's a fiefdom order |
Hundi (also spelled 'Hundee') was a bill of exchange used in post-Harsha (7th century onwards) India for commercial transactions. Merchants used Hundis to:
- Transfer funds between distant cities without carrying cash
- Settle commercial debts
- Hedge against currency/weight variations
This was sophisticated medieval financial instrument predating European bills of exchange by centuries. Arab + Indian merchants used Hundis extensively in Indian Ocean trade.
Answer: (c) A bill of exchange.
Why each option is right or wrong
- (a) Incorrect. That's a royal order/mandate, not a financial instrument.
- (b) Incorrect. That's an accounting ledger/record.
- (c) CORRECT. Hundi is a bill of exchange used in medieval Indian commerce for transferring funds between merchants.
- (d) Incorrect. That's a feudal obligation, not a financial instrument.
Key point
Hundi = Medieval bill of exchange. Merchant A issues Hundi to Merchant B for payment via intermediary in another city. Settled through merchant networks. Evidence: Arab traveler Al-Beruni (11th century) mentions Hundi in Indian commerce.
Remember
The term 'Hundi' generally referred to in sources of the post-Harsha period defines a BILL OF EXCHANGE - a financial instrument used by merchants to transfer funds between distant locations without physically carrying money.
Common mistakes
- Confusing Hundi with Iqta (feudal land grant) or royal mandates. Hundi is private commercial paper, not administrative.
- Assuming modern banking invented bills of exchange. Indian merchants used Hundis for 1000+ years before European banking.
- Missing that Hundi system shows India's sophisticated pre-colonial commerce (urban centers, merchant networks, financial instruments).
Exam tip
Hundi variants: Sight Hundi (payable on demand), Time Hundi (after specified period), Darshani Hundi (at first request). Used by Jain, Bania, Bohra merchants. System survived into British period; Hundis still used in parts of South Asia.
Sources
- Al-Beruni - Alberuni's India (11th century observations)
- D. R. Gadgil - Origins of Industrial India