For 20 years, Yale was part of the British East India Company, and he became the second governor of a settlement at Madras (now Chennai), India, in 1687, after Streynsham Master. He was instrumental in the development of the Government General Hospital, housed at Fort St. George. Yale amassed a fortune in his lifetime, largely through secret contracts with Madras merchants, against the East India Company's directive. By 1692, Elihu Yale's repeated flouting of East India Company regulations and growing embarrassment at his illegal profiteering resulted in his being relieved of the post of governor.
In 1718, Cotton Mather contacted Yale and asked for his help. Mather represented a small institution of learning that had been founded as the Collegiate School of Connecticut in 1701, and it needed money for a new building in New Haven, Connecticut. Yale sent Mather a carton of goods that the school subsequently sold, earning them 560 pounds sterling, a substantial sum in the early 1700s. In gratitude, officials named the new building Yale; eventually the entire institution became Yale College.
As soon as Elihu Yale took over the administration of Fort St George on July 26, 1687, he implemented an order dated January 14, 1685 which required the British at Fort St George to make all attempts at procurement of the town of St Thome on lease. To this effect, Chinna Venkatadri was sent to negotiate with the local Governor on August 4, 1687. The mission was successful and Chinna Venkatadri assumed sovereignty over St Thome for a period of three years. Notwithstanding the vehement protests of the Portuguese inhabitants of St Thome, the British gained absolute control over all lands up to St Thomas Mount for a period of three years.
In September 1688, the Mughal Emperor Aurangazeb took Golconda after a prolonged battle. The Sultan of Golconda was taken prisoner and the state annexed by the Mughals. The newly designated Mughal Subedar of the province immediately sent a letter to the British authorities at Fort St George demanding that the British at Madras acknowledge the overlordship of the Mughal Emperor. To this, the British complied willingly. Aurangazeb guaranteed the independence of Madras, but in return demanded that the British supply troops in the event of a war against the Marathas. It was around this time that Yale's three-year old son David Yale died and was interred in the Madras cemetry.
The records of this period mention a flourishing slave trade in Madras. When the demand began to increase rapidly, the British merchants began to kidnap young children and deport them to distant parts of the world, very much against their will. The administration of Fort St George eventually stepped in and introduced laws to curb the menace. On February 2, 1688, Elihu Yale, with the support of a majority of factors, decreed that henceforth, slaves should be examined by the judges of the choultry before being transported. Transportation of young children, in particular, was made illegal.
During Yale's Presidency, a plan for setting up a corporation in Madras was conceived by Josiah Child, the President of the Board of Directors of the British East India Company, in a letter addressed to the factors at Madras on 28 September 1687. Three months later, Josiah Child and his deputy had an audience with James II, and as per the ensuing discussions, a Charter was issued by the king on 30 December 1687 which established the Corporation of Madras. The charter came into effect on 29 September 1688, and a Corporation was established comprising a Mayor, 12 Aldermen, 60-100 Burgesses and sergeants. Nathaniel Higginson, who was then the second member of the Council of Fort St George took office as the Mayor of Madras.
On June 22, 1688, an Armenian delegation to London met with the Directors of the British East India Company and demanded permission for Armenian traders to settle in Madras. Soon Armenians began to arrive in Madras in large numbers giving rise to the large and powerful Armenian community which played a significant part in the politics of Madras in the 1700s. In August 1689, a French fleet appeared near the coast of Ceylon compelling the Governor of Pulicat Lawrence Pitt who was on high seas to seek protection within the bastions of Fort St George. Throughout the year 1690, French naval ships from Pondicherry ravaged the coast in order to drive the British and the Dutch out of the East Indies but were unsuccessful. They eventually withdrew from their enterprise when faced with heavy losses. It was also during this time that the British purchased the town of Tegnapatnam from the Marathas.
As governor of Fort St. George, Yale purchased territory for private purposes with East India Company funds, including a fort at Tevnapatam (now Cuddalore). Yale imposed high taxes for the maintenance of the colonial garrison and town, resulting in an unpopular regime and several revolts by Indians, brutally quelled by garrison soldiers. Yale was also notorious for arresting and trying Indians on his own private authority, including the hanging of a stable boy who had absconded with a Company horse..
Charges of corruption were brought against Elihu Yale in the last years of his Presidency. He was eventually removed in 1692 and replaced with Nathaniel Higginson as the President of Madras.
In her article for Atlantic Monthly about Skull and Bones, Alexandra Robbins alleges that the gravestone of Elihu Yale was stolen years ago from its proper setting in Wrexham, and is displayed in a glass case, in a room with purple walls, which belongs to a building called the Tomb of the Skull and Bones at Yale University.
In 1999, American Heritage magazine rated Elihu Yale the "most overrated philanthropist" in American history, arguing that the college that would later bear his name (Yale University) was successful largely because of the generosity of a man named Jeremiah Dummer, but that the trustees of the school did not want it known by the name "Dummer College".