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Head of State
Emperor Edward VII
22.1.1901 -  6.5.1910

We all know what a bank does. It accepts our deposits, makes loans and carries out other financial activities. But is that what the mission of a bank should be? Or should a bank step outside of its traditional roles and focus on the social needs of  its members? These are questions that the founders of the Salem District Urban Bank Limited asked themselves. And in 1904, during the British occupation of India, a small group of Madras Presidency locals came up with a unique approach to banking - do what is right for the people they serve.

So with this backdrop, Sir P. Rajagopalachari, the first Registrar of Madras Central Bank, became the key figure driving the establishment of the Salem District Urban Bank in Tamil Nadu, India. As India's first cooperative bank, its initial focus was to help the poor by promoting savings but as we will discover later, it also had bigger ideas. The Salem Bank was inaugurated on 6 January 1904 with 16 members and a share capital of 1,000,000 Rupees and was presided over by the Government of India.

A novel approach was used by printing an initial quantity of 10,000 One Rupee "banknotes" and distributing them free to local patrons along with a savings box, similar to the Kiddy Bank scheme (helping kids save), as a way to encourage all poor people to start saving.

The 1 Rupee note was issued as a local currency receipt for the purpose of helping poor people in the district of Salem. Not intended to be a true circulating currency note, it could be redeemed 24 hours after presenting it to the Bank. As might be expected, this 1 Rupee became very popular and within a few months of issue a curious thing happened - it began passing from one person to another as happens with normal circulating currency.

With their success in helping the poor, the Salem District Urban Bank governors set their sights on other pressing problems of the era. They initiated a local campaign to prohibit the use of liquor and encouraged people to save their alcohol money. Next came an anti-leprosy drive, in which the Bank hired its own leprosy doctor, an efficacious move.

Because of the power the Salem District Union Bank amassed, the British Crown agents began to suppress it, fearing that the Bank had anti-British intentions. These fears were not entirely without ground since the Bank was doing more for the people in this district than the Crown and they felt the pressure of the independence movement (although it did not come for another half century).

Continuing to expand, a new building of the Salem Urban Bank Ltd. was inaugurated by the Prince of Mysore on 11 April 1932 at a site that cost 15,000 Rupees with a construction that reportedly cost 45,000 Rupees, a huge sum at the time.

The Salem Bank subtly exhibited an anti-British and pro-Indian stance and as a result, the deposits began rolling in. Then, under tremendous pressure from the British Government, they discontinued all development schemes including the issue of the popular 1 Rupee note, which they reluctantly withdrew, never to be issued again.

Although the results proved how important these local programs were to the community, they presented too much of a threat to the Crown's authority. The Bank eventually stopped the anti-liquor drive, dismissed the doctor who was treating the leprosy patients and discontinued the Kiddy Bank program altogether.

It is believed that all of the 1 Rupee notes were destroyed by the Bank under the pressure of the British Crown, save the surviving example shown above. This is the earliest reported instance in India where a Bank issued a banknote unilaterally for the benefit of poor and initiated other important social programs that had a significant impact on the local people. Unfortunately the Salem Bank closed its doors during World War II. This phenomenon studied by visitors from other parts of India, Ireland and the U.S.A. is one of the earliest examples of a successful local currency program.

Of historic similarity to the Salem note is the Khadi Hundi, dedicated to Mohandas Karamchand "Mahatma" Ghandi who helped poor women spin Khadi cloth to improve their lives. Interestingly, the Andhra Bank of Andhra Pradesh re-instituted their Kiddy Bank program in 2007 allowing children from ages 10 thru 18 to open and manage their own accounts, capitalizing on the new economic prosperity of India. 

MD   We gratefully acknowledge Indian numismatist Musham Damodhar of Adarsh Stamps & Coins for submitting the above image and background information. Please visit his website: http://www.philanumis.com/  where you will find a wide array of numismatic, philatelic and other unique material.

This site also includes a very interesting history of playing cards, including the ancient Ganjifa Indian playing cards. Musham Damodhar also has a blog where you can find information about his son, who has been certified as the youngest accomplished stamp collectors in the world. Email: Musham Damodhar