UPSC CSE Prelims
Mughal Society and Economy Previous Year Questions (PYQs)

Detailed Explanation:

Answer: Option 3 — A bill of exchange

A Hundi in the post-Harsha period was a negotiable financial instrument used extensively by merchants for trade and credit transactions. It functioned as a bill of exchange, whereby one party would issue a written order to another to pay a specified sum to a third party, either immediately or at a future date. This system facilitated long-distance trade without the need to physically transport large amounts of currency, making it safer and more efficient.

📝 Short Notes: Hundi System in Medieval India

• Definition: Hundi was an indigenous bill of exchange used as a financial instrument for trade and money transfer in medieval India.
• Function: It served as a written order from one merchant (drawer) instructing another (drawee) to pay a specified amount to a third party (payee), facilitating cashless transactions.
• Types: Various types existed including Darshani (payable on sight), Muddati (payable after a specified period), and Shah Jog (payable to a respectable/creditworthy person).
• Usage: Widely used by merchant communities (like Marwaris, Gujaratis) for remittances, trade financing, and credit transactions across long distances.
• Advantages: Eliminated risk of carrying physical cash, reduced transaction costs, and provided credit facilities to traders.
• Historical Continuity: The Hundi system evolved from ancient times and continued well into the colonial period, demonstrating the sophistication of Indian commercial practices.