In 1864, the Back Bay Reclamation Company entered into Bombay's wild speculation and in time became subject to swindling operations. Bombay's banks and financial institutions caught the speculative fever over cotton and provided easy credit. In all, approximately one hundred and fifty business firms and fourteen banks became involved in the frenzied mania. Thus the economic condition of Bombay then experienced a swindling surge.
On 22nd June 1864, citizens of Bombay organised the speculative Financial Association of India and China with the goal of promoting greater trade, selling real estate, receiving deposits and trading in government stocks. This further supported the economic condition of Bombay.
In January 1865, the slow fall of cotton prices in Liverpool, foretold by the coming end of the American Civil War, brought the bursting of this economic bubble, which by June 1866 was complete. Amidst the wreckage was included the collapsed Bank of Bombay. In consequence, the Government of India established its own financial institutions and withdrew from the presidency banks the power to issue currency notes.
In 1866, the Government of India passed the Company Act. The act compensated many of the inadequacies in the operations of the joint stock company as experienced in the boom and bust history of cotton in Bombay and later tea in Calcutta. It required an auditor's report and an annual balance sheet to be presented to share holders.
The period of 1870s experienced the significant growth of the managing agency system in India. An agency provided managerial direction and fiscal control for a number of firms. In Calcutta they organised particularly in the cotton, jute and tea industries, while in Bombay they centred on cotton manufacturing. By 1875 thirty-one managing agents held responsibility for ninety companies.
In 1876, the Presidency Banks Act developed from the irregularities and failures of banks, particularly in Bombay in the 1860s. The three Presidency Banks in Calcutta, Madras and Bombay subsequently functioned under a uniform set of regulations established by the Government of India. This legislation further forced the government to withdraw its capital and to cease appointing bank directors, secretaries and treasurers. Henceforward, the government maintained oversight and audit roles.
The Factory Act of 1881 and that of 1892 began the process of governing hours of work, wages and working conditions, particularly for women and children. These measures came into application in those firms using mechanical powered machines, employing more than one hundred workers and operating more than four months a year. The measure applied mostly to the textile industry of Bombay.
During the 1890s, India, especially Bombay, suffered both from severe famine and plague. In economic terms, the increased mortality and dislocation fell heavily on the agricultural worker. Capital flow was disorganised and demand for products sank in the general disorder of society. Capital losses in agriculture particularly embraced the loss of bullocks to starvation.