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PRE-INDEPENDENCE BANKING:
The origin of modern Banking in India dates back to the 18th century.
Bank of Hindusthan was established in 1770 and it was the first bank at Calcutta
under European management.
Banking Concept in India was brought by Europeans.
In 1786 General Bank of India was set up.
On June 2, 1806 the Bank of Calcutta established in Calcutta. It was the first
Presidency Bank during the British Raj.
Bank of Calcutta was established mainly to fund General Wellesley’s wars against
Tipu Sultan and the Marathas.
On January 2, 1809 the Bank of Calcutta renamed as the Bank of Bengal.
In 1839, there was a fruitless effort by Indian merchants to establish a Bank called
Union Bank but it failed within a decade.
On 15th April, 1840 the second presidency Bank was established in Bombay – Bank
of Bombay.
On 1 July 1843 the Bank of Madras was established in Madras, now Chennai. It was
the third Presidency Bank during the British Raj.
Allahabad Bank which was established in 1865 and working even today.
The oldest Public Sector Bank in India having branches all over India and serving the
customers for the last 145 years is Allahabad Bank. Allahabad bank is also known as
one of India’s Oldest Joint Stock Bank.
These Presidency banks worked as quasi central banks in India for many years under
British Rule.
The Comptoire d’Escompte de Paris opened a branch in Calcutta in 1860.
HSBC established itself in Bengal in 1869
Calcutta was the most active trading port in India, mainly due to the trade of the
British Empire, and so became a banking centre.
The Oldest Joint Stock bank of India was Bank of Upper India established in 1863 but
this bank was become defunct in 1913.
In 1881, Oudh Commercial Bank was established at Faizabad it was the first Bank of
India with Limited Liability to be managed by Indian Board. After Independence, in
1958 this bank failed.
In 1895 Punjab National Bank was established in Lahore in Punjab province of
Undivided India. It was the first bank purely managed by Indian. PNB has not only
survive but also become the second largest public sector bank in India.
The first Indian commercial bank which was wholly owned and managed by Indians
was Central Bank of India which was established in 1911.
Central bank of India was also called India’s First Truly Swadeshi bank.
The Swadeshi movement inspired local businessmen and political figures to found
banks of and for the Indian community. The period between 1906 and 1911
thousands of Banks were established in India. Many of those banks established then
have survived to the present such as Bank of India, Corporation Bank, Indian Bank,
Bank of Baroda, Canara Bank and Central Bank of India.
At least 94 banks in India failed between 1913 and 1918 due to economic crisis
during World War I.
In 27th January, 1921 Bank of Calcutta, Bank of Madras and Bank of Bombay were
amalgamated to form Imperial Bank of India.
In 1926 Hilton-Young Commission submitted its report.
In 1934 Reserve Bank of India act was passed.
On the recommendation of Hilton-Young Commission, on 1st April 1935 Reserve
Bank of India was established.
RBI was established with initial share capital worth Rs. 5 crore with 5 Lakh Rs. 100
share dividend.
POST-INDEPENDENCE BANKING HISTORY:
Immediately after the Independence, the partition of India in 1947 adversely impacted the
economies of Punjab and West Bengal by paralyzing banking activities for months. With end of
British rule in India marked the end of a regime of the Laissez-faire for the Indian banking sector.
The Government of India initiated measures to play an active role in the economic life of the nation,
and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed
economy. To streamline the functioning and activities of commercial banks, the government of India
has come up with the Banking Companies act, 1949. The Reserve Bank of India, India’s central
banking authority, was nationalized on January 1, 1949 under the terms of the Reserve Bank of India
(Transfer to Public Ownership) Act, 1948. The Reserve Bank of India was vested with major powers
for the supervision of banking inn India as he central banking authority.
The Banking Regulation Act also provided that no new bank or branch of an existing bank could be
opened without a license from the RBI, and no two banks could have common directors.
During those days, the general public had lesser confidence in Banking. As an aftermath, the deposit
mobilization process was very slow. Moreover, the savings bank facility provided by postal
department was considered comparatively safer than banks, and funds were largely given to traders.
POST-INDEPENDENCE BANKING HISTORY CAN BE CLASSIFIED INTO TWO MAJOR CATEGORIES:
Nationalised Banks in India – Bank Nationalisation in India
In India, the Banking Sector has been dominated by Government or Public Sector Banks (PSBs) for
last 64 years. In 1954 the All India Rural Credit Survey Committee submitted its report
recommending creation of a strong, integrated, state-sponsored, state-partnered commercial
banking institution with an effective machinery of branches spread all over the country. The
recommendation of this committee led to establishment of first Public Sector Bank in the name of
State bank of India on July 01, 1955 by acquiring the substantial part of share capital by Reserve
Bank of India, of then Imperial Bank of India. Similarly during 1956-59, as a result of reorganization
of princely states, the State Bank of India associate Bank came into fold of Public sector banking.
On July 19, 1969, the Govt. promulgated Banking Companies (Acquisition and Transfer of
Undertakings) ordinance 1969 to acquire 14 bigger commercial banks with deposits over 50 Crores.
The main objective behind this bank nationalisation was to spread banking infrastructure in rural
India and make cheap finance available to Indian farmers.
bank_nationalisation_-_india1The second phase of bank nationalisation took place in 1980 during
the prime ministerial tenure of Indira Gandhi, in which 6 more banks were nationalised with deposits
over 200 Crores.
List of Nationalised Banks in India:
1. Allahabad Bank
2. Andhra Bank
3. Bank of Baroda
4. Bank of India
5. Bank of Maharashtra
6. Canara Bank
7. Central Bank of India
8. Corporation Bank
9. Dena Bank
10. Indian Bank
11. Indian Overseas Bank
12. Oriental Bank of Commerce
13. Punjab and Sind Bank
14. Punjab National Bank
15. Syndicate Bank
16. UCO Bank
17. Union Bank of India
18. United Bank of India
19. Vijaya Bank
BANK LIBERALISATION IN INDIA – LIBERALISATION IN BANKS
Liberalisation in banking sector in India noticed in early 1990s’ when India adopted a new economic
policy for the development of the nation. Narasimha Rao government embarked on a policy of
liberalization, licensing a small number of private banks. For the first time in India new private banks
got license for providing banking service. These banks came to be known as the New Generation
tech-savvy banks.
The first bank in India set up after the adaptation of new liberalization policy in banking sector was
Global Trust Bank. It was later amalgamated with Oriental Bank of Commerce. The list of banks set
up after new liberalization policy includes Global Trust Bank, UTI Bank (Now known as Axis Bank),
ICICI Bank and HDFC Bank.
This move towards the Liberalisation along with the rapid economic growth in India, re-energize the
banking sector in India. Indian banking sector has noticed rapid growth with strong contribution
from all sector of banks – government banks, private banks and foreign banks.
The next stage for the Indian banking sector has been set up with the proposed relaxation in the
norms for Foreign Direct Investment (FDI). All Foreign Investors in banks can holds up to 74% with
some restrictions of the company.
The origin of modern Banking in India dates back to the 18th century.
Bank of Hindusthan was established in 1770 and it was the first bank at Calcutta
under European management.
Banking Concept in India was brought by Europeans.
In 1786 General Bank of India was set up.
On June 2, 1806 the Bank of Calcutta established in Calcutta. It was the first
Presidency Bank during the British Raj.
Bank of Calcutta was established mainly to fund General Wellesley’s wars against
Tipu Sultan and the Marathas.
On January 2, 1809 the Bank of Calcutta renamed as the Bank of Bengal.
In 1839, there was a fruitless effort by Indian merchants to establish a Bank called
Union Bank but it failed within a decade.
On 15th April, 1840 the second presidency Bank was established in Bombay – Bank
of Bombay.
On 1 July 1843 the Bank of Madras was established in Madras, now Chennai. It was
the third Presidency Bank during the British Raj.
Allahabad Bank which was established in 1865 and working even today.
The oldest Public Sector Bank in India having branches all over India and serving the
customers for the last 145 years is Allahabad Bank. Allahabad bank is also known as
one of India’s Oldest Joint Stock Bank.
These Presidency banks worked as quasi central banks in India for many years under
British Rule.
The Comptoire d’Escompte de Paris opened a branch in Calcutta in 1860.
HSBC established itself in Bengal in 1869
Calcutta was the most active trading port in India, mainly due to the trade of the
British Empire, and so became a banking centre.
The Oldest Joint Stock bank of India was Bank of Upper India established in 1863 but
this bank was become defunct in 1913.
In 1881, Oudh Commercial Bank was established at Faizabad it was the first Bank of
India with Limited Liability to be managed by Indian Board. After Independence, in
1958 this bank failed.
In 1895 Punjab National Bank was established in Lahore in Punjab province of
Undivided India. It was the first bank purely managed by Indian. PNB has not only
survive but also become the second largest public sector bank in India.
The first Indian commercial bank which was wholly owned and managed by Indians
was Central Bank of India which was established in 1911.
Central bank of India was also called India’s First Truly Swadeshi bank.
The Swadeshi movement inspired local businessmen and political figures to found
banks of and for the Indian community. The period between 1906 and 1911
thousands of Banks were established in India. Many of those banks established then
have survived to the present such as Bank of India, Corporation Bank, Indian Bank,
Bank of Baroda, Canara Bank and Central Bank of India.
At least 94 banks in India failed between 1913 and 1918 due to economic crisis
during World War I.
In 27th January, 1921 Bank of Calcutta, Bank of Madras and Bank of Bombay were
amalgamated to form Imperial Bank of India.
In 1926 Hilton-Young Commission submitted its report.
In 1934 Reserve Bank of India act was passed.
On the recommendation of Hilton-Young Commission, on 1st April 1935 Reserve
Bank of India was established.
RBI was established with initial share capital worth Rs. 5 crore with 5 Lakh Rs. 100
share dividend.
POST-INDEPENDENCE BANKING HISTORY:
Immediately after the Independence, the partition of India in 1947 adversely impacted the
economies of Punjab and West Bengal by paralyzing banking activities for months. With end of
British rule in India marked the end of a regime of the Laissez-faire for the Indian banking sector.
The Government of India initiated measures to play an active role in the economic life of the nation,
and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed
economy. To streamline the functioning and activities of commercial banks, the government of India
has come up with the Banking Companies act, 1949. The Reserve Bank of India, India’s central
banking authority, was nationalized on January 1, 1949 under the terms of the Reserve Bank of India
(Transfer to Public Ownership) Act, 1948. The Reserve Bank of India was vested with major powers
for the supervision of banking inn India as he central banking authority.
The Banking Regulation Act also provided that no new bank or branch of an existing bank could be
opened without a license from the RBI, and no two banks could have common directors.
During those days, the general public had lesser confidence in Banking. As an aftermath, the deposit
mobilization process was very slow. Moreover, the savings bank facility provided by postal
department was considered comparatively safer than banks, and funds were largely given to traders.
POST-INDEPENDENCE BANKING HISTORY CAN BE CLASSIFIED INTO TWO MAJOR CATEGORIES:
Nationalised Banks in India – Bank Nationalisation in India
In India, the Banking Sector has been dominated by Government or Public Sector Banks (PSBs) for
last 64 years. In 1954 the All India Rural Credit Survey Committee submitted its report
recommending creation of a strong, integrated, state-sponsored, state-partnered commercial
banking institution with an effective machinery of branches spread all over the country. The
recommendation of this committee led to establishment of first Public Sector Bank in the name of
State bank of India on July 01, 1955 by acquiring the substantial part of share capital by Reserve
Bank of India, of then Imperial Bank of India. Similarly during 1956-59, as a result of reorganization
of princely states, the State Bank of India associate Bank came into fold of Public sector banking.
On July 19, 1969, the Govt. promulgated Banking Companies (Acquisition and Transfer of
Undertakings) ordinance 1969 to acquire 14 bigger commercial banks with deposits over 50 Crores.
The main objective behind this bank nationalisation was to spread banking infrastructure in rural
India and make cheap finance available to Indian farmers.
bank_nationalisation_-_india1The second phase of bank nationalisation took place in 1980 during
the prime ministerial tenure of Indira Gandhi, in which 6 more banks were nationalised with deposits
over 200 Crores.
List of Nationalised Banks in India:
1. Allahabad Bank
2. Andhra Bank
3. Bank of Baroda
4. Bank of India
5. Bank of Maharashtra
6. Canara Bank
7. Central Bank of India
8. Corporation Bank
9. Dena Bank
10. Indian Bank
11. Indian Overseas Bank
12. Oriental Bank of Commerce
13. Punjab and Sind Bank
14. Punjab National Bank
15. Syndicate Bank
16. UCO Bank
17. Union Bank of India
18. United Bank of India
19. Vijaya Bank
BANK LIBERALISATION IN INDIA – LIBERALISATION IN BANKS
Liberalisation in banking sector in India noticed in early 1990s’ when India adopted a new economic
policy for the development of the nation. Narasimha Rao government embarked on a policy of
liberalization, licensing a small number of private banks. For the first time in India new private banks
got license for providing banking service. These banks came to be known as the New Generation
tech-savvy banks.
The first bank in India set up after the adaptation of new liberalization policy in banking sector was
Global Trust Bank. It was later amalgamated with Oriental Bank of Commerce. The list of banks set
up after new liberalization policy includes Global Trust Bank, UTI Bank (Now known as Axis Bank),
ICICI Bank and HDFC Bank.
This move towards the Liberalisation along with the rapid economic growth in India, re-energize the
banking sector in India. Indian banking sector has noticed rapid growth with strong contribution
from all sector of banks – government banks, private banks and foreign banks.
The next stage for the Indian banking sector has been set up with the proposed relaxation in the
norms for Foreign Direct Investment (FDI). All Foreign Investors in banks can holds up to 74% with
some restrictions of the company.
