Theoretically, the home balances were used to meet India's UK commitments. In reality, they often far exceeded the country's liabilities, from 1860/1 to 1939/40 averaging £6m, and rising to £18m in 1910/11 and £16.6m in 1917/18 (Figure 15). This excessive size was partly designed to allow the IO to make loans to the City and to increase the Bank of England's gold holdings, which directly benefitted Indian finance, and was partly the result of poor budgeting and an aversion to risk. The uncertainty of the monsoon and unexpected external ‘shocks’ caused estimates of expenditure and receipts to be highly inaccurate (Figure 15) and officials were well aware that India's failure to meet its liabilities, especially interest payments, would severely damage its credit. It thus kept a generous minimum balance of £3m, reduced to £2–2.5m in 1908 and then raised to £4m in 1913/14.

These minimums were substantially exceeded from 1904, largely due to the decision to sell council bills without limit, and, to an even greater extent, from 1909/10 to 1912/13, for which a myriad of factors was responsible. In India, there was a series of good monsoons, which increased exports/government revenues and reduced famine relief expenditure, a rise in opium exports to China, relatively little capital expenditure and an unexpected increase in Savings Bank deposits.