How worthless ‘banana money’ issued after World War II troubled business in Asia

In 1945, after the war ended, Seethalakshmi Achi, the widow of a Nattukottai Chettiar moneylender whose firm had operations in Madras and Burma, filed a debt recovery case before the district court in Devakkottai in Madras.

The substance of the case was this: Seethalakshmi’s husband, Meyappan Chettiar, had borrowed from another Rangoon-based firm, owned by Veerappa Chettiar. When Burma was under Japanese occupation in 1944, Meyappan Chettiar’s agent who transacted on his behalf had reportedly made several repayments toward the loan to Veerappa Chettiar’s agent. However, a year later, Veerappa Chettiar successfully sued Meyappan Chettiar in Madras, alleging that these payments were never made. Seethalakshmi Achi, Meyappan Chettiar’s legal representative, appealed the decision before the Madras High Court.

The litigation dragged on for six years, from 1945 to 1951. It brought up questions about the validity of the Japanese wartime currency in which Veerappa Chettiar had repaid the debt, as well as the broader legal issue of the status of the contracts between Chettiar firms in India and their agents in Burma. These agents and their principals were pushed to opposing sides in the war, putting the validity of the contract of agency between them into question. In international law, these legal issues were framed as being about the nature of wartime occupation and the implications of the legal status of “enemy alien” for Indians who remained in Burma during the war. This seemingly unimportant debt recovery case gestured to the difficulties that Indian migrants faced in reviving capital, credit, and money circulations in the wake of the postwar economic collapse in South and Southeast Asia.

Traders, financiers, and businessmen were eager to return to Burma from India at the end of the war. But as the British military administration and later the elected Burmese government formulated plans for postwar reconstruction, they encountered a swift backlash of nationalist sentiment directed at returning “foreign” capital.

These sentiments had been on the rise since the 1930s. Those in debt to Chettiar moneylenders, who had borrowed money and extended land as collateral, found themselves dispossessed when they defaulted on payments. Along-side the rising resentment against Chettiar moneylenders, the dominance of migrant laborers from India in Rangoon’s industries – from the harbour to the timber mills – was also a cause for concern. It was therefore not surprising that public sentiment went against the return of foreigners to Burma after the war. Governments imposed rigid requirements on people attempting to access citizenship in Burma and on the associated rights of travel, movement, and residence across new national borders. But these claims to citizenship began, not with declarations of political loyalties, but with jurisdictional claims in cases like Seethalakshmi Achi’s.

This chapter begins with debt recovery cases and the legal issues around “banana money” and then looks at how the situation was further complicated by restrictions on migrant remittances and property transfer by “foreigners.” These measures solidified jurisdictional borders between India and Burma. This latter set of financial restrictions began to have a profound and immediate impact on the daily lives of traders, financiers, and moneylenders like the Nattukottai Chettiars, for whom the first years of decolonization and political independence were marked by litigation over them. In response, moneylenders approached courts in Madras, not Rangoon. The outcome of their legal cases had rippling effects on the life of other migrant communities in Burma as well.

Wartime displacements complicated an already fraught financial relationship between India and Burma; Burma’s separation from India and its constitution as a separate Crown colony between 1935 and 1937 had made the circulation of credit and capital between the two colonies more expensive than previously. On the eve of the war, under the Upper Burma Land and Revenue Regulations, the Nattukottai Chettiars’ Association in Rangoon was also engaged in negotiations with the British Burma government over resumption of nearly four hundred acres of ayadaw (Crown) lands that had come into their possession as a result of foreclosed mortgages, one of many different ways in which their capital had become tied up in land instead of freely circulating.

Faced with these already dwindling circulations, many left Burma with their wealth. This was portrayed in newspapers in Burma as the flight of “refugee capital” and, after the war ended, was leveled as a charge of political disloyalty against displaced traders, financiers, and moneylenders in the context of legal cases. In response, they claimed that their wealth had been destroyed by the changes in currency in circulation, giving rise to a set of legal issues around what came to be known as “banana money.”

“Banana money” was a moniker for the currency or military scrip circulated by the occupation government in Malaya. Currency notes were stamped with the image of banana plants to evoke the country’s tropical landscape – hence, “banana money”.

Similarly, in Burma, such notes featured images of pagodas. When the war ended, business communities like the Chettiars in Burma and Malaya realised, as Seethalakshmi Achi did, that because of the galloping inflation during the war, “banana money” was worthless and that debts repaid to them in “banana money” were invalid. This set legal disputes in motion, affecting a world of commercial transactions beyond debt recoveries, including property transactions, land ownership, and migrant remittances, and threatening the stability of postwar economies.

In May 1942, the occupation-backed government in Burma, headed by lawyer-politician Ba Maw, issued the Burma Monetary Arrangements Ordinance, which replaced the British Burmese rupee with the Burmese kyat, equal to a hundred cents – on par with other currencies in the proposed Greater East Asia Co-Prosperity Sphere. Initially, both the rupee and the kyat were in circulation. But those using the British-issued rupee instead of the occupation’s military scrip were suspected of being spies and faced the possibility of retribution; the rupee gradually dropped out of circulation.

By 1943, almost all transactions in Burma were carried out in occupation currency rather than in the old British Burmese rupee. Between 1940 and 1943, nearly 310 million occupation rupees had been printed and circulated, compared to a circulation of 335 million British Burmese rupees before the war began. It would become one of the most consequential decisions made by the occupation government in Burma. This wartime decision transformed everyday economic transactions.

The occupation governments pumped money into the economy. Indeed, the noted scholar and diplomat Maung Maung wrote of this time that labourers were paid in currency notes that were freshly printed on portable presses, the paper still wet with ink. These changes to the legal tender took place within an economy that was rapidly collapsing: in the face of imminent enemy occupation, the retreating British forces had adopted a “scorched earth” policy, destroying bridges, boats, and timber mills. Transport and communications systems broke down almost entirely.

Without railway networks, rice could not be transported from Lower to Upper Burma. At the same time, the devastation of Rangoon Harbour meant that no exports were made to Ceylon, India, or Europe. Burma and its biggest export markets were arraigned on opposite sides of the war. Paddy fields grew into jungles as prices for rice on the world market crashed. Traders, financiers, and moneylenders – many of whom owned or were invested in mines, timber mills, or plantations – faced seemingly insurmountable challenges.

Similar events were underway in Malaya under Japanese occupation. Rubber plantations and tin mines stopped yielding much-needed tax revenue. As Maung Maung noted in the case of Burma, migrant labourers, both Indian and Chinese, who stayed on the plantations in Malaya were also paid in “banana money”; they likely accepted these notes because, by contrast, those forced to toil to build the “death railway” from Bangkok to Moulmein were not paid at all and faced the risk of certain death. Prices for everyday goods soared: a loaf of bread cost eight dollars, a single banana was forty cents.

Hoarding, profiteering, and black-marketing thrived. As the occupation economy showed ominous signs of decline and collapse, the value of its currency – banana money – dropped like a stone in the sea. To add to the confusion, three of the four currencies in circulation during the war in Burma were identical in appearance to the Indian rupee, making it impossible to detect or demonetise them during the war. Neither the Burmese government in exile in India nor the Colonial Office in London seemed to know how much circulating British currency remained, for in the chaos of an impending military occupation, many officials had not signed off on certificates attesting to the destruction of currency.

By comparison and to give a rough estimate of the economic impact, according to historian Paul Kratoska, the records of the Selangor administration in Malaya that survived from the war indicate that nearly $104 million worth of stock was destroyed and almost $4 million worth of valuables went to Australia for safekeeping. From Singapore, stock was also destroyed, and nearly $39 million was shipped to India. In Burma, this confusion over currency gave rise to propaganda-fueled rumors that “refugees” fleeing to India from the Japanese invasion were not really refugees but speculators planning to cash in their “Burma notes.” Currency speculation was also a spectre for the Burma government-in-exile in India, who feared that the Japanese occupiers would leverage it to reduce the economy’s reliance on Chinese and Indian capital and replace them with Japanese commercial interests. In the face of these dire economic prospects, the caricature of people fleeing across borders with enemy-issued money was a useful distraction from the chaos and confusion.

These multiple circulating currencies and galloping inflation deeply worried Chettiar firms with long-standing financial interests in both Burma and Malaya. According to Marilyn Longmuir, who studied the Burmese currencies in circulation between 1937 and 1947, Chettiar firms were especially “heavy users” of banknotes. Partially because of Depression-era foreclosures in the 1930s, Chettiar firms owned paddy fields and timber mills in Burma and rubber plantations and tin mines in the Straits Settlements. The circulation of the Chettiars’ credit and capital had already been hampered by legislative restrictions on moneylending in the aftermath of the global economic depression and forced foreclosures. It was now dealt a significant blow by wartime inflation and worthless currency.

These fears were transmitted back to Madras. Pamphlets in Tamil intended to circulate in Madras noted that during the war, migrants from South India in Burma were subjected to all manner of horrors and were forced to flee to India or hide out in the countryside, away from the plundering and looting in Rangoon, where many of the Chettiar firms were located. Although many fled Rangoon during the air raids, the pamphleteer observed that the retreat of the Chettiar agents was singled out in public discourse as mudalali durokam (treachery by proprietors). Chettiar agents who stayed were forced to transact in military scrip – recall the wartime transactions between Meyappan and Veerappa and their agents in Burma – and in response many firms converted their funds into gold to preserve value. The Japanese occupation was thus believed to have obliterated the Chettiars’ economic presence in Burma.

Scholars also note that Chettiar firms in Malaya were forced to make voluntary contributions for the welfare of Japanese troops. Reportedly, the Nattukottai Chettiars’ Association in Singapore alone donated as much as $100,000. Other Chettiar firms contributed to the cause of the Azad Hind Fauj and to the Azad Hind Bank, to the tune of nearly 20 million rupees Indeed, Umadevi Suppiah estimates that almost 17.5 per cent of Chettiar revenue in Malaya during this time went into Indian National Army coffers: overall, nearly 215 million rupees were contributed to the Azad Hind Bank, largely through the contributions of Indians in Southeast Asia in “banana money.” More generally, as land and business owners, the Chettiar firms were forced to continue to pay property and real estate taxes, according to Kratoska, but were left with only Japanese currency to meet these expenses. Across present-day Southeast Asia, the Japanese invasion froze the circulation of credit and capital networks like those of the Chettiars.

Excerpted with permission from Boats In a Storm: Law, Migration and Citizenship in Post-War Asia, Kalyani Ramnath, Context/Westland.