The most important form of credit instrument that evolved in India was termed as ‘Hundis’ and their use was reportedly known since the twelfth century. Hundis were used as instruments of remittance, credit and trade transactions, and were of various types, each type with its own unique features.
However, with the steady rise in volumes of trade and commerce and the growing confidence of the public in the usage of cheques, etc., there was also rapid growth in the payment transactions using these instruments. With the development of the banking system and higher volume of cheques used, the need for an organised cheque clearing process emerged amongst the banks.