Staying together, for better or for worse

Staying together, for better or for worse

Nattukottai Chettiars from 78 villages in Tamil Nadu found opportunity in the emerging markets of South-East Asia and grew rapidly. Though external factors reduced the wealth of a major part of this once strong community, there are lessons to be drawn from the way it did business  


Not many may know that the present day Indian Bank and Indian Overseas Bank were started by Nattukottai Chettiars from Tamil Nadu in the early 20th century. Alagappa Institute of Technology and Annamalai University – two renowned educational institutions in the state – were also started by two stalwarts of this community. AC Muthaiah is well known as a member of the BCCI and which Indian hasn’t heard of M.A. Chidambaram stadium, named after yet another Nattukottai Chettiar? Justice A.R. Lakshmanan and poet Kannadasan have risen to fame in their chosen professions and belong to this community, which traditionally was in the business of credit. And P. Chidambaram, India’s current Union Minister of Finance traces his lineage to this community.

Raman Mahadevan, independent researcher and Chennai-based economic historian, is soon to release a book, Fortune Seekers: The Rise & Decline of Nattukottai Chettiars, to be published by Penguin. This is a result of his years of research that began in 1973 as a part of his doctoral thesis where he traces the growth and fall of this community of moneylenders from south India, about whom not much is known. The research throws up factors that led to its tremendous growth within a few decades, including its ability to spot an opportunity and capitalise on it, a tight-knit structure and the intra-caste network. But this same structure became so deeply engrained that when disaster struck, many were unable to get out in time and cut their losses.

Dr. Raman shares his findings:

Delving deep

Not much has been written about Nattukottai Chettiars of Tamil Nadu, especially in the colonial period. A business historian needs evidence for his thesis and that was difficult to come by till I went to the Chettinadu heartland.

One of the greatest challenges, Indian historians, especially business historians, face is secrecy and lack of access to authentic documents. But I was lucky to find archival data in the form of newsletters, pamphlets and documents about land holdings and even some correspondences that throw light on the Nattukottai Chettiars and their activities in the late 19th and early 20th centuries.

Looking back

The early history of Nattukottai Chettiars is romanticised with myths and legends. Records show that this community was involved in the trade of pearls and salt towards early 19th century. Moneylending to poligars, zamindars and other land owners and large farmers was another of the major activities of this small community which had a population of just about 10,000 in 1896. It grew to 30,000 in 1920 and even today, that figure stands at a little over a lakh.

With the industrialisation of India in the mid-19th century, the Marwaris, Parsis and Gujarati Banias emerged as a strong force in the credit business and spread to various parts of the country, including the south, crowding the Chettiars out.

Secondly, land was the main collateral against which credit was advanced. But legislation in the case of taking over the land of a defaulter was very cumbersome and this left the lender with nothing in case of non-payment.

By mid-1930, the now 30,000-strong community emerged as a major purveyor of credit in large parts of South-East Asia. What is significant about its mobility is the organised way in which it spread out, riding on a strong community bonding while establishing a structure and culture of trust.

Thirdly, they had no alternatives in India as industry was controlled by the Europeans, who had banks to get loans from.

Subsequently, when in the later part of the 19th century, South-East Asia provided expansion opportunity, the Chettiar community established operations across Burma, Malaysia and Ceylon. By mid-1930, the now 30,000 strong community emerged as a major purveyor of credit in large parts of South-East Asia. What is significant about its mobility is the organised way in which it spread out, riding on a strong community bonding while establishing a structure and culture of trust.

Burma had become a major centre for paddy, Malaysia for rubber plantations and tin mines and Ceylon for coconut, coffee and tea. Since there was a high demand for cash, the Chettiars established branches and worked through agents to identify potential customers to lend to and recover money from.

Building a strong foundation

Interestingly, every individual in the community invested into this credit advancing machinery set up by the Nattukottai Chettiars. Even women who had assets of their own did not let their money lie idle.

Every major city had an office that was linked to a network of agencies that worked at the grassroot level. There was a facility to transfer cash between agencies and even different groups, which strengthened the network.

The agents were youth from poorer families in the community. They were sent on a three-year tenure. Six months before their tenure expired, the next agent would be sent for training to take over. The first agent would return and get a bonus for his services. He could take up work with another agency or start working on his own and become a part of the system.

This was a system based on trust and any dishonest agent would automatically lose credibility with the entire community.

Wherever the community had a presence, a temple was built, dedicated to Lord Muruga. The members met every month and decided on the interest rate they would charge. Caste panchayats were held to resolve disputes. Katangis or transit houses were maintained from the cess charged to the various groups.

Rough estimates, which seem likely to be underestimates, show that the assets of the Nattukottai Chettiars grew from Rs. 10 crore in 1890 to Rs. 200 crore in 1920. Burma contributed the most followed by Malaysia and Ceylon. South India contributed the least.

End of a dream run

The face of the world changed during Great Depression. Though the Nattukottai Chettiars had nothing to do with the West, in a cascading effect, demand fell and the prices of primary products fell with that. While Ceylon started experiencing it in 1925-26, it hit Burma after 1930 when the price of paddy fell from Rs 150 per 100 baskets to Rs 60. Farmers found repaying difficult and suddenly, the Chettiar community was sitting on highly fertile land. But with the Japanese invasion and Burmese independence, the Chettiars were forced to leave with nothing to their name. While some were able to restructure their business, many others were unable to diversify and were soon reduced to penury. The Karaikudi antique market is proof of this as homes had to be denuded of their teakwood doorframes, brassware and other exquisite, highly valuable interiors for survival.

In the aftermath

While some Chettiars survived and entered tertiary businesses through the credit route, one of the major impacts of the Nattukottai Chettiars’ focus on credit business at the international level was the entry of other communities into business and industry in south India. Today, there is a resurgence of sorts and Nattukottai Chettiars have entered all professions thanks to better education. But as the nature of the business world itself had changed, nullifying community affiliation, a possible hegemony in any field by any community was rendered impossible. The community weakened in the post-depression, post World War II period.

Looking at the history of the Nattukottai Chettiar community, with specific reference to its business practices, there are certain takeaways for entrepreneurs of any generation; most importantly, the need to be responsive to opportunities and to be aware of the perils of over-commitment.  While agility marked the early growth of this community, the burden of a heavy structure and an inability to cut its losses before it was too late brought about its downfall.


The growth of Nattukottai Chettiars in the cusp years of 19th and 20th centuries has many lessons that apply to running a business, even in today’s times: 

Spotting an opportunity – when the going got tough, the moneylenders from south India were quick to grab the opportunity emerging markets in South-East Asia offered.

Displaying agility – a majority of the community moved, en masse, to establish offices and branches across the regions it was active in.

The need for reliable people – the network of people was well-established so that even smaller towns and villages where there was tremendous demand for credit could be well served. Most importantly, most businesses had a reliable group of people working for them

Presenting a unified front – though different companies serving this sector cropped up, the community retained its strong bonds and collaborated effectively.

Placing checks and balances – the highly integrated system ensured high levels of business ethics were practiced across all levels. 

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