History of Banking In India

In Banking Awareness
October 20, 2015

Banking Awareness

The significance of banking in our day to day life is being felt increasingly. What are the institutions, so inevitable in the present day set up? How do they transact? How did the concept emerge?
In this article we’ll, explore the birth of this flourishing industry.

History of Indian Banking System

India has a long history of financial intermediate. A type of business organization recognizable as managing agency houses took form in period from 1834 to 1847. Earliest of these was Hindustan Bank, established by one of the agency houses in Calcutta in 1770. Banking in India originated in the last decades of the 18^th century.

The first banks were,

S. No	Year	Bank
1	1786	The General Bank of India
2	1790	Bank of Hindustan

But both are not in existence now.

The East India Company established,

S. no	Year	Bank
1	1809	Bank of Bengal/Calcutta
2	1840	Bank of Bombay
3	1843	Bank of Madras

These three individual units were called as Presidency Banks.

The other banks during this period were,

S. no	Year	Bank
1	1865	Allahabad Bank
2	1894	Punjab National Bank
3	Between 1906 and 1913	Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, Indian Bank and Bank of Mysore

In 1921, all presidency banks were amalgamated to form the Imperial Bank of India, was run by European shareholders.
The Reserve Bank of India (RBI) was established on 1^st April 1935, in accordance with the Reserve Bank of India Act, 1934.
After independence, the Government of India came up with the Banking Companies Act, 1949 later changed to Banking Regulation Act 1949 as per amending Act of 1965.
RBI was vested with extensive powers for the supervision of banking in India as a Central Banking Authority.
In 1955, Imperial Bank of India was nationalized and given the name “State Bank of India” (SBI), to act as a principal agent of RBI and it was established under State Bank of India Act, 1955.

Seven subsidiaries of SBI was nationalized in 1959.

SEVEN SUBSIDIARY AND MERGING

State Bank of Patiala
State Bank of Hyderabad
State Bank of Travancore
State Bank of Bikaner and Jaipur
State Bank of Mysore
State Bank of Saurashtra
State Bank of Indore

State Bank of Saurashtra in 2008 and State Bank of Indore in 2010, merged with SBI.

On 19^th July, 1969, 14 major Indian commercial banks of the country were nationalized.

NATIONALISATION OF BANKS (1969)

Central Bank of India
Bank of Maharashtra
Dena Bank
Punjab National Bank
Syndicate Bank
Canara Bank
Indian Bank
Indian Overseas Bank
Bank of Baroda
Union Bank
Allahabad Bank
United Bank of India
United Commercial Bank
Bank of India

In 1980, another six banks were nationalized with deposits over 200 crore and thus raising the number to 20.

NATIONALIZATION OF BANKS (1980)

Andhra Bank
Corporation Bank
New Bank of India (In 1993 merged with Punjab National Bank)
Oriental Bank of Commerce
Punjab and Sind Bank
Vijaya Bank

On the suggestions of Narasimhan Committee, the Banking Regulation Act was amended in 1993 and thus the gates for new private banks were opened.
In 1971 Credit Guarantee Corporation was formed
In 1975 Regional Rural Banks (RRBs) were formed.
By the end of 1974, three separate institutional arrangements Commercial Banks, Cooperative Banks, RRBs were emerged.
Establishment of National Bank for Agriculture and Rural Development (NABARD) in 1982 for cooperative credit.
Apart from NABARD,

S. no	Bank	Purpose
1	EXIM(Export-Import Bank of India)	Agricultural Sector
2	SIDBI(Small Industries Development Bank of India)	Credit needs of small industries
3	NHB(National Housing Board)	Housing Board

In 1988 Securities and Exchange Board of India was established to cater the security market in India.
Since 1991, the Indian financial system has undergone radical transformation leads to the development of Non Banking Financial Companies (NBFCs) and Development Financial Institutions (DIFs).
Competition has been infused into the financial system by licensing new private banks since 1993.
The minimum capital of new Private Sector Banks should be Rs.300 crore.

These banks are

PRIVATE SECTOR BANKS

Axis Bank Ltd
Development Credit Bank Ltd
HDFC Bank Ltd
ICICI Bank Ltd
Industrial Bank Ltd
Kotak Mahindra Bank Ltd
Yes Bank Ltd

In India the number of Foreign Banks is increasing in Private Sector and these banks will do all the commercial banking business.

FOREIGN BANKS IN INDIA

HSBS Ltd
Deutsche Bank
BNP Paribas
State Bank of Mauritius
Doha Bank
Standard Charted Bank
Bank of America
AB Bank Ltd
The Royal Bank of Scotland
Industrial Bank of Korea

Banks have come a long way from the temples of the ancient world, but their basic business practices have not changed.
Even if the future takes banks completely off your street corner and onto the internet, or has you shopping for loans across the globe, the banks will still exist to perform this primary function.

Happy Reading!!