Hundis were important financial instruments developed on the Indian subcontinent to facilitate trade and credit in pre-modern and early modern economies. They formed a crucial part of the indigenous banking and mercantile system and were widely used by traders, moneylenders, and bankers. Hundis served multiple purposes: as remittance instruments for transferring money from one place to another, as credit instruments or acknowledgements of debt, and as bills of exchange in commercial transactions.

Technically, a hundi was an unconditional written order by one person directing another to pay a specified sum of money to a named person or bearer. Although often compared to bills of exchange, hundis functioned more like cheques issued by indigenous bankers. Being part of an informal financial system, hundis had no legal status, and were not covered under the Negotiable Instrument Act, 1881. Despite this, they were widely trusted and played a vital role in sustaining long-distance trade and commercial networks in India.