We have now traced the operations of the banks in India and China, and have seen how their funds are invested and brought home to Europe. It remains to be shown in what manner these funds are replaced in the east, and again rendered available for similar operations.

There are various modes in which return remittances are made, but they are chiefly as follows :

Shipments of Specie.

Council Bills and Telegraphic Transfers.

Mercantile Bills of Exchange. The specie shipments to the East consist mainly of bar silver, which is shipped in large quantities every year to India, and on arrival is either sold in the bazaars, or sent into the Mints for coinage into rupees. Gold is also occasionally shipped, being made up into small bars suited for the Indian markets. For China, Mexican dollars, being in favour with the natives, form the principal mode of remittance, while shipments of bar silver are sometimes made. Recently large amounts of Austrian florins have also been remitted via Venice to Bombay.

The peculiar financial position of India in relation to this country has been the means of providing the banks with a mode of remittance outwards, which is more convenient than and equally as safe as shipments of specie. We refer to the drafts drawn by the Secretary of State for India on the treasuries of Calcutta, Bombay, and Madras. The expenditure of the India Government in this country on account of interest on sterling loans and guaranteed railway stocks, retired pay, furlough allowances, pensions, annuities, stores, etc, amounts in round figures to about fifteen millions sterling per annum, and in order to provide the necessary funds, the Government invites tenders weekly for its drafts on India, which are payable in rupees on demand. Recently the Government has also given applicants the option of tendering for telegraphic transfers, and these are payable in India the day after payment is made here by the purchaser. Allotments are made to the highest bidders, but the Government reserves to itself the right of fixing a minimum without declaring it. The results of these weekly issues are looked forward to with the greatest interest by the banking and mercantile community, as they are the barometer which indicates and frequently regulates the course of the Eastern exchanges. Not only does a vast multitude of transactions connected with our Eastern trade hinge upon the allotments of these bills, but upon them also depends to a great extent the value of silver in the markets of Europe. Indeed, so great is the influence exercised on financial and commercial transactions throughout this country and the East by the result of a single issue of Council bills, and so great is the uncertainty attending it, depending almost entirely as it does on the action of the Anglo-Indian banks, that it appears exceedingly doubtful if the Government were well advised in departing from its former practice of inviting tenders twice a month only. By the new system of weekly issues, which was suddenly introduced at a time of difficulty, the fluctuations in exchange, and the consequent changes and uncertainties in the Eastern trade, have been more than doubled. Formerly there could be at the most twenty-four allotments during the year, but under the present system there may be as many as fifty-two. Moreover, the comparatively small amount now offered on each occasion places it in the power of one or two institutions to force up exchange artificially, and this could not fail to act most prejudicially upon Eastern business generally, and especially upon the export trade of India. Any advantage which the Government might derive from the higher rate thus temporarily obtained would be more than counterbalanced by the disturbance caused to commerce, which would show itself sooner or later in a diminished demand for their bills. The additional anxiety, labour, and expense entailed by these weekly issues on the banking and mercantile community are very considerable, and as it is extremely doubtful if the Government derive any compensating advantage from them, it is to be hoped that the Secretary of State will see his way ere long to revert to the old policy, which for many years worked successfully, of issuing his drafts only on the first and third Wednesdays in each month.

The third mode of remittance to the East; to which we have referred, viz. mercantile bills of exchange, does not require much explanation. They are usually drawn at 30 and 60 days after sight, and are in most cases accompanied by relative shipping documents, which are hypothecated to the purchasing banks. By adopting this precaution, the drawers of the bills as well as the banks which negotiate them are protected against loss, as the drawees cannot obtain possession of the goods without paying the drafts which are drawn against them. Besides the bills which are thus purchased by the banks at the current rates of exchange, large numbers are sent out for collection and return of proceeds, the banks charging a commission for carrying through the business. A considerable part of our export trade with India and China is settled in this manner, the balance being arranged by remittances from the other side in bills and telegraphic transfers. We here annex a statement compiled from official returns showing the value of the exports and imports of India in merchandise and bullion for the six years ending 31st March, 1876. We have added to this statement the amount of the drawings of the Secretary of State during the same period, as these are equivalent to further importations of goods, and reduce proportionately the balance of trade in favour of India. These figures show that the apparent unadjusted balance due to India at the 31st March, 1876, was about two millions, and if we deduct the difference in exchange on the Government drawings, it is reduced to less than one million sterling. When it is remembered that this includes the large balance due by China to India, and that no allowance is made for family remittances homewards, it will no longer be a matter for surprise that the Eastern exchanges experienced a serious fall in the summer of last year. Although that fall may have been accelerated and intensified by special circumstances affecting the silver market, it is not too much to say that it was to a great extent justified by the then existing state of eastern trade.