Mercantile Bank

The Mercantile Bank of Bombay was founded in 1853 by two local businessmen: Cowanjee Nanabhoy and Edwin Heycock. Early shares were divided almost equally between European and Indian residents. The new bank quickly changed its name to the Mercantile Bank of India, London and China, demonstrating its ambition to expand and follow the flow of commerce.

A network developed with branches located in London, Kolkata, Chennai, Colombo, Singapore, Hong Kong and Shanghai. The bank also received a Royal Charter, which gave it the right to issue banknotes and required the transfer of head office to London. The next few decades saw phases of growth and profitability, but the organisation also weathered periodic losses and a number of management misjudgements. The Mercantile’s situation was compounded by a significant fraud by a long-established customer in 1892. The scandal cost even more in lost deposits as customer confidence in the bank was badly shaken. The board cut costs to mitigate the impact, but eventually decided the best option was to reconstruct the bank as a new legal entity. The plan was put into action with the formation of a new organisation, The Mercantile Bank of India Limited, which began trading in 1893. This strategy helped to stabilise business and recover confidence.

Back on a growth footing, the Bank of Calcutta was acquired in 1906, followed by the Bank of Mauritius in 1916. New branches were opened in Bangkok, Jakarta and Surabaya. The Great Depression led to a downturn, but worse was to come during the Second World War. Many of the bank’s staff signed up to the armed forces and branches were shut due to enemy occupation. Post-war, the bank witnessed the historic moment of India’s independence from the UK, and the upheaval of partition.

The Mercantile had a solid network of more than 30 branches by the 1950s, with an especially strong presence in the Indian subcontinent and Malaysia. Its name was simplified to become the Mercantile Bank Limited in 1957. In that same year, The Hongkong and Shanghai Banking Corporation (HSBC) became a major shareholder. The Mercantile was ripe for takeover and HSBC opened negotiations, keen to ensure that a major rival did not take advantage. The initial deal was rejected, but talks resumed later and an agreement was reached in March 1959. Mercantile Bank retained its identity for many years. It continued to operate branches in locations that overlapped with HSBC’s own network, and integration of staff and systems was slow-paced. The firm’s head office was moved from London to Hong Kong in 1965, but full absorption of the business only concluded in 1984. Many of HSBC’s branches in India today can trace their origins back to the long history of the Mercantile Bank.

Further reading: ‘Crisis Banking in the East: The History of the Chartered Mercantile Bank of India, London and China 1853-1893’ by Stuart Muirhead (Scolar Press/Ashgate, 1996); ‘The Paradise Bank: The Mercantile Bank of India, 1893-1984’ by Edwin Green and Sara Kinsey (Ashgate, 1999).