Family history: A writer investigates why her great-grandfather chose to sail to South Africa

The crash it warned of came with the ending of the American Civil War in 1865 and the tapering demand for cotton. On the Liverpool market, the price of cotton fell from 20 to 10 pence. The bubble broke and panic spread in Bombay as people tried to offload shares in worthless companies. By mid-May, one by one, the city’s wealthy businessmen went bankrupt. The swollen giddy money market contracted and overdue bills piled up at the Bank of Bombay. A commission was set up to inquire into the bank’s failure.

Dinsha E Vachcha, in his book, A Financial Chapter in the History of Bombay City, writes: “Lakhs were given away on personal security … These again were permitted to be renewed to an indefinite extent at any rate till the mischief was done irretrievably.” Premchand was allowed by other shareholders and directors “to withdraw vast amounts of money from the Bank to finance his multitudinous schemes – directly and indirectly Rs 1.38 crore … a colossal and unheard-of advance” and also, half of the Bank of Bombay’s total capital.

As the doomsayers had predicted, thousands of shareholders were wiped out and many households in Bombay teetered on the verge of ruin. The saga of...

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