[Extracts from Sir F. A. NicJiolson's Report pp. 242-72.'] 

 MADRAS LOAN SOCIETIES (FUNDS NIDHIS). 



The leading idea of these Nidhis is mutual credit ; a certain 

 number of men form a company under the Companies' Act, and 

 attract other members ; these pay a monthly subscription for a given 

 term, at the end of that term affairs are wound up and profits 

 divided. Members may get loans from the society, repaying them 

 with interest by monthly instalments. The idea is sound, but requires 

 development; at present they are of very limited scope and fulfil 

 merely the object of the similar class of Building Societies of Great 

 Britain and the United States, on the model of which, even to the 

 verbal adoption of their rules, they have been founded. It is curious 

 that these societies, as their history will show, might almost have 

 been developed directly from indigenous practices, viz., from the 

 Kuttu-chit system, a fact which forms a striking argument in favour 

 of the suitability of the Fund system to the presidency, and gives 

 promise of its great future development as a method of thrift and 

 credit. The enormous development of the present system in England, 

 and especially in the United States, where it appears to be rivalling the 

 Savings Bank, is a proof of its general suitability to small folk, and 

 it can probably be adapted to suit rural and agricultural needs. 



History. The Nidhis, as now found, originated in Madras, in the 

 Fund called the Sadar Court Fund, open to officials only ; it seems to 

 have been started about the middle of the century. But the founda- 

 tion principle, viz., that of association for mutual credit, is found in 

 the indigenous ( Kuttu-chittu ' system, which is universal throughout 

 the presidency. 



This latter system depends upon (1) association, (2) confidence. 

 (3) honest dealing, and its universality speaks highly for the general 

 honesty of Madras villagers, for the power of the village and caste 

 system to prevent fraud, and for the possibility of a development in 

 Madras of European associations based upon similar principles. 

 Briefly it is as follows; a number of men unite to subscribe periodi- 

 cally a small sum each, say 50 men agree to pay Re. 1 per month for 

 fifty months ; each month Us. 50 are subscribed, and lots are drawn 

 for the total sum ; the winning lot takes the pool ; next month the 



