10. In addition, therefore, to the grounds for making loans in India from the Paper Currency Reserve which I have given in earlier chapters, I believe that it is in this direction that the best hope lies of a remedy for the high level which the Indian Bank Rate commonly reaches in the course of each busy season. I do not feel in a position to say anything very decided as to the manner in which such loans could be best made. But there is a presumption, I think, that, in the absence of a State Bank, they must be made, mainly if not entirely, through the Presidency Banks. And I believe that the Government would act advisedly if, as a general rule, 5 or 5½ per cent were the highest rate they ever chose to exact from the Banks. In financial matters of this kind there is a danger lest Governments prove too jealous of the profits of private persons. In a case where the co–operation of private persons is necessary, they must be allowed a reasonable share of the profits of the transaction. In their past relations with the Presidency Banks in the matter of temporary loans, the Government of India have sometimes seemed to attach more importance to preventing the Banks from making any profit out of the loans than to any other aspect of the transaction. I may repeat that the loans I contemplate are to be for the busy season only, and that they should not be made until the expectation of a normal or successful harvest is reasonably assured. 11. In the nature of a postscript to the above proposals, it may be instructive to consider them in the light of the actual circumstances of the season 1912–13. The peculiarity of this season from the point of view of the Indian Money Market was the combination of a high Bank Rate in India for a comparatively long period[126] with a relatively low rate of exchange and only a moderate demand for Council Bills and gold. At the end of 1912 the situation could have been described as normal. The Bank Rate was at the somewhat high level usual at that time of year; exchange was high (the minimum rate for the allotment of Council Bills being 1s. 4–3/32d.); and the demand for Council Bills was on a large scale. But from January to March, although the Bank Rate remained at a high level and trade was active, the demand for Council Bills fell away, slowly at first and rapidly during March, exchange dropping _pari passu_ until, during the latter half of March, the minimum rate at which Council Bills were allotted fell so low as 1s. 3–31/32d. The combination of so low a rate of exchange with an 8 per cent Bank Rate at Bombay was very abnormal.