Banaras’ Unique Rolling Credit System Paralysed: De-Monetization

A post dated bearer cheque passes through at least three if not six hands, as a promissory note even buying silk thread before reaching the bank

Banarasi Weaver

Resham Silk Thread worth hundreds of thousands was bought between November 8 and 15, pushing the price up by a thousand rupees per kilo, as producers and businesses made a practical decision to change cash for silk

There’s a stunned paralysis when you move around the streets of Banaras. After ‘Notebandhi’ as de-monetization has been aptly termed, the season has come to a standstill and a weird kind of paralysis has gripped the market(s). Iconic both as a spiritual and religious pilgrimage spot for the Hindu Sanatana Dharma, and for Buddhists, and also the hub of a vast and complex trade centre and production hub, market of small and large, self-made industry, the Banarasi silk weaving industry, Banaras sits comfortably with both identities. Both the trade and production sides of Banaras –the business centre- depend heavily on cash flow, both also have a smooth and complex system of credit note exchange; for the systems at work for decades, the rather mindless, de-monetization has meant simply a sudden paralysis: a freeze.

Awaiting December 31, and the new cash-credit withdrawal norms, the over 10-15 lakh weaver producers and petty and big businesses who depend and revolve around this art of weaving work there wily business heads around the impact of this de-monetization move; one frenetic bit of activity was witnessed between the night of November 8 and 15, 2016 as the impact of the decision first sunk in.

From the night of November 8 until November 15, just like gold (in other parts of the country) the price of pure silk resham went up substantially, from Rs 4-5,000 a kilogram. “Paison ka Resham Ban Gaya (Money was converted into silk,” one large producer, on conditions of anonymity, told this writer.
Another, upper middle class master weaver converted as much as Rs 40 lakhs in old notes (Rs 500 and Rs 1,000 that were declared to be illegal) into pure Banarasi silk thread! (This was on the belief that Resham kahin jaane wala nahin, the silk thread at least was going nowhere and could be used in the weaving business!). Money even travelled as far as Surat in Gujarat to be exchanged, many businessmen told this writer.
Synonymous with the weaving of the Banarasi Silk Saree, the narrow streets of this vast and complex megapolis on the banks of the Ganges, are homes to the famous handlooms that weave the magic of master craftsman’s designs. The powerloom has encroached on the catholicity of this art, however. The price of a Banarasi saree can go up and beyond Rs 1,00,000 and the joys and complexities of weaving with pure resham (silk) thread) can be understood only by connoisseurs. 

A vast population of 10-15 lakh persons are closely linked to the Banarasi saree production business, only half of whom are Muslim. Though the word bunker (weaver) tends to draw imagery of a talented Muslim artisan, the production and trade is at least, 50 per cent, also beneficial to non-Muslims. From buying the thread to weaving the magic designs to selling the final product, this business is heavily dependent on not just cash but credit flow. More of that a bit later.

Trade Hub

Banaras is also the epicenter of booming trade and market. Eastern Uttar Pradesh, Purvanchal, Western and Central Bihar and northern Madhya Pradesh –nearly four dozen districts are serviced by the whole sale mandis located in Banaras. From the ever necessary, ghee and oil, to suji and maida (different kinds of flour especially used in creation of sweets), to the mandi that sells the shaadi ka samaan (the peculiar and typical goods needed for the Indian wedding), all these are procured by the retailer from the mandi at Banaras.

Post November 8, the traders engaged in this wholesale and retail businesses have been caught literally with the shutters down: they were and are not able to change the monies (legit not black!!) needed for the high daily and weekly turnovers, they are not able to ‘buy’ and ‘sell’ goods with the Rs 24,000 limit (savings) and Rs 50,000 (current account). “Itni boori haalat hai ki bade bade karobhar walen rickshaw chalan rahe hai,” one such businessmen, requesting anonymity told this writer.

An academic and political activist, Akhilendra Pratap Singh told Sabrangindia, “Be it power loom or handloom production or the larger economy of trade; this economy is basically cash-based. De-monetization has not just frozen the local economy but ground to a halt, arbitrarily stopped, and destroyed the economy without any gain. Cash is what turns the economy, and the piece of paper, the hundi is the credit or the guarantee that the monies promised will finally, eventually be paid. This is an age-old, well worked out and established system; a cottage industry and production system that has with one cruel stroke been completely destroyed,” he explained.

“In any state or country if both the production systems and trade collapse, you can understand the vulnerable state of that economy. There are lakhs of people working within this system of trade and production and each of them have been severely impacted by this mindless move. There are the workers, the weavers (who are the petty producers) and the traders who have been totally destroyed. My reports are that 70 per cent of the economy is badly affected. In Badhoi, also known for its weaving production centres, 60 per cent of the work has stopped. In distress, people are running to villages, with no cash and no work.”

The Economics of the Saree Producing Industry of Banaras

This is a unique system of cash flow and credit that also represents a Unique Business Model. The wheels of this model revolve around credit flow. The Weaver, the Bunkar is at the heart of it.

Ateeq Ahmad, a writer and small producer of Banarasi sarees himself explained the way this system works in an hour-long interview to Sabrangindia.

“The wholesalers from metro cities buy the sarees woven by weavers/small producers/ master craftsmen. The transaction is 100 Per cent on credit, Udhaar par chalta hai.

How does it work?

“There are roughly 10-15 lakh persons involved in this business-50 per cent Muslims; 50 per cent Non-Muslim. The payment to the Weaver/ Small Producer is always through post dated bearer cheques.

“This post-dated Bearer Cheque is used as a Credit/Promisory Note in three different ways depending on the financial weight/strength of the Weaver-Producer.

“In either of the three scenarios, one Bearer Cheque passes through at least two-three Hands, sometimes as many as six hands before it is finally encashed at the bank. A Bearer Cheque is used as both a Promisory Note and Credit Note.

The Banaras Battawalla

Batta means literally Discount.

“In the third case, when the Cheque immediately goes to the ‘Battawalla’, the small weaver gets the amount on cheque minus a percentile: The percentile amount depends upon the worthiness of the party who’s signature is on the cheque: if it is a credit worthy party, then 2 per cent is cut (two per cent ‘batta’ (discount); if the party does not have goodwill then the small weaver has to sacrifice as much as 4-5 per cent of the total amount.

Who is the Battawalla?

“There are several in the Batta Bazaar of Banaras that opens from 3-7 p.m. every day at Chowk, the heart of the business district . There are 2-4,000 Battewallas who sit and trade post dated bearer cheques for cash. Peak time for the business at the Chowk is 3-7 p.m. (could be a lawyer part time!) The Battawala is a part time money lender: he could be a front for a large financier who is able to supply the cash that is needed.
“The Battawala is Supreme within the business: he can command the shots especially at festival time (Eid or Diwali) where the vulnerable small producer needs the money immediately on the post dated cheque) and is willing to sacrifice larger amounts from the sum total for the small but vital joys of buying festive clothes for his/her family.”


The Night of November 8 and Notebandhi

Since that fateful night of November 8, this entire business of the Saree Mandi, credit driven business of Banarasi Sarees is in a state of stunned paralysis as the impact of Modi’s Monetization move has simply put, just paralysed this credit flow. It is presently not at clear how this de-monetization will impact on this complex but practical system. How will it impact the producers?The shop owners (Dukandaars)?  The System of Credit Flow (Udhaar)?
With one drastic and ill-thought out decision, a fatal blow has been dealt to a well oiled system. After November 8 no one is accepting the post dated bearer cheque as no one is sure of what permissible levels of cash withdrawals will be after December 31.
Today, with the confused and ever-changing announcements by the Central Government, a Rs. 50,000 limit on cash withdrawals for the current account has been placed. And this business demands Rs 5 lakhs worth of withdrawals per day! From where will the money come? As anger and resentment brews, hundreds of thousands of persons are waiting –with bated breath-for the new rules to be announced that will be effective, post December 31.
The saree weaving business is the backbone of eastern Uttar Pradesh, much more than agriculture Even. Of the 38 lakh strong population of Banaras, as many as 10-15 lakhs are intimately involved in this business.


The cruel blow caused by de-monetization has been made worse when, for the first time in three years, the weavers and producers were actually looking for a windfall during the current wedding season. Since 2014, the duplicate Saree market, dominated by Surat in Gujarat has hogged much of the business, despite the town falling within prime minister Narendra Modi’s parliamentary constituency. Surat produces artificial silk thread, available at much lower cost. Duplicate Banarasi sarees are being produced using artificial material. This has severely hurt the Banarasi saree weaving sector, putting pressure to reduce the cost of original Banarasi saree in the market.
According to the Union Ministry of Textiles, out of the 38.47 lakh adult weavers and allied workers in the country, 77% are women and 23% male weavers, 10% of the weavers are from scheduled castes (SCs), 18% of the weavers are from scheduled tribes (STs), 45% are from other backward classes (OBCs) and 27% are from other castes. (Though not aggregated it is clear that ‘other castes’ refer to the highly talented Muslim weaver, the traditional bunker of Banaras.



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