Gold Of The Gods: Roots Of The Banking System In Ancient India

Aaditya Sengupta Dhar Oct 23, 2024

Temples seemed to have offered loans at extremely low rates, ostensibly with the view of supporting the economy and society

To most, banks are institutions that encapsulate the capitalist spirit: shrewd bodies that facilitate the free flow of money, following the creed of interest and profit. Temples, on the other hand, are institutions built on creeds of faith and divinity, notions far removed from the cold, capitalistic forces that drive banks. In ancient India, though, these worlds met in one of the world’s earliest banking systems, for temples were more than places of worship. They also comprised a thriving financial ecosystem that fuelled societies and economies much like modern banks do.

It is generally held that banks originated in medieval Europe, and picked up during the Renaissance, enabled by the culture of free trade, commerce, and innovation. The Bank of Venice, founded in 1157, is held by some to be the first modern bank. Banks, after all, seem very modern concepts, a natural part of modern capitalistic systems, However, a look at ancient Indian records reveals a similarly thriving financial network.

Chawda of the University of Delhi explains how this happened: wealthy patrons would make vast donations to temples, who would loan the donated money on interest. Temples were the only recipients of such vast donations, and so were perfectly positioned to be the financial hubs of ancient India. The historian Nilakanta Sastri thus calls the temple one of “the most notable recipients of gifts in land and cash”, allowing it to play “an important role in shaping the economic and social life of the neighbourhood”.

This importance was vast- temples would support communities afflicted by famines or floods, finance infrastructure projects, and wars, and fund domestic and international trade. Money could be lent to village assemblies, farmers, and private bodies, and could be repaid through cash or through specified items the temple demanded. Often, as Kavitha writes in the International Journal of Business and Management Invention, the lent money was “utilised in bringing waste lands under cultivation” by village assemblies.

The paucity of written records in ancient times limits the details we have, but 13th century records indicate that temples continued to play this role in diverse ways for centuries. At times, temples would also sell a portion of their land and use the proceeds to support small-scale social welfare projects, as a 1381 inscription from Tiruppanangadu illustrates, saying that temple authorities repaired a breach in the village tank in this way. At other times, they would engage directly with the government, such as the Tirupati temple, which financed the Vijayanagara Empire’s military campaigns. They would also sponsor vast infrastructure initiatives, like the Srirangam Temple in Tamil Nadu, which funded an irrigation system from donations that benefited the public.

Overall, historian Burton Stein writes in his book Peasant State and Society in Medieval India that “The great temples of South India…operated as banks with the ability to collect taxes, receive and disburse funds, and hold treasures in trust.”

Temples seemed to have offered loans at extremely low rates, ostensibly with the view of supporting the economy and society. According to Chola inscriptions, loan rates ranged from 12 per cent to 15 per cent annually, lower than those offered by private moneylenders, making temples highly attractive sources of loans. Sometimes, these were even lower- for instance, a 1342 AD inscription from Melkote in Karnataka shows that the temple loaned 50 kalanju of gold to a merchants’ guild at an interest rate of just 6.25 per cent per annum.

Today, a visit to the sprawling, opulent temples of India shows the vestiges of this ancient past, unfurled in full glory for the world to see. Relics like the 750kg golden dome in Amritsar’s golden temple or the 80-feet-high pole in the Padmanabhaswamy Temple in Trivandrum, Kerala, are just the tip of the iceberg- over 22 billion dollars of treasure has been unearthed in the Padmanabhaswamy Temple in Trivandrum, Kerala, roughly double the wealth of Vatican city, which is estimated to be worth 10-15 billion dollars. The Tirumala Tirupati Temple is also valued at 11 billion dollars. The World Gold Council estimates that India’s temples hold around 22,000 tonne of gold, while the government has only 500 tonne in its reserves.

Ancient India is often admired for its wealth of philosophy and ideas that shaped how people think about life and the world around them. The hidden history of India’s temples shows that the richness of its contributions also impacted how the economy ran, and was once the pulse of a thriving Indian economy and society, fuelling its surge to being the world’s largest economy by the 5th century AD.