It will help to make the points at issue plain if I begin by taking an extreme case. Let us suppose that exchange between London and Calcutta were fixed at 1s. 4d., in the sense that the Government were always prepared to provide telegraphic remittance _in either direction_ at this rate. Under such circumstances, the London and Indian Money Markets would become practically one market, and the large differences which can now exist between rates current in the two centres for loans on similar security would become impossible. The effect of this on the volume of remittance would be very great. Every year immense sums would be remitted from London to India in the busy season and brought back again at the end of it, since the fact which now diminishes the profitableness of such transactions would have ceased to exist. The following illustration shows on how large a scale these seasonal movements to and fro would probably be. In July the cash reserves of the Bank of Bengal might stand, as things now are, at, let us suppose, about 1000 lakhs and its discount rate at 3 per cent. This reserve might be 400 or 500 lakhs at least in excess of what prudence required. But it would be useless to lower the Bank Rate; for the additional funds were probably not loanable in India for the month of July at any rate at all. Yet for the reasons already given it would not be worth while in existing circumstances for any one to borrow this sum and remit it to London, until such time as it may be again wanted in Calcutta;—it is better to let it lie idle and wait for busier times. But fix exchange at 1s. 4d. and all this would be changed. The Bank’s customers would immediately remit the 400 or 500 lakhs to London, knowing that they could be brought back without loss as soon as they were wanted. Every one in India having loanable funds to spare would act likewise.