Hundis: India’s Ancient Financial System That Based on Trust

As explained in the video, India had both a unique indigenous commerce system and informal financial instruments called Hundis. Hundis are essentially handwritten financial instruments with no formal definition, yet were easily accepted across regions with much more trust than what exists today between merchants and customers.

Despite the lack of legal underpinning, the approach proved surprisingly effective. Transactions were quick, confidential, and low-cost, all of which are characteristics that the World Bank now considers to be essential for a robust commercial network.

When the British arrived, they quickly realized the importance of the Hundi system in sustaining a pan-India economy. Instead of discarding it, they attempted to standardise and integrate it into the colonial financial framework.

The legacy of Hundis highlights how deeply rooted community trust and local practices can create a resilient and efficient financial system, long before the age of banks or digital payments.