Origin and Development of Banking in India

The banking sector as a result of financial sector reforms that were introduced as a part of structural reforms initiated in 1991. We can summaries the origin of banking in India in the following ways

History of Banking in India

Globally, the story of banking has much in common, as it evolved with the moneylenders accepting deposits and issuing receipts in their place. Banking was fairly varied and catered to the credit needs of the trade, commerce agriculture as well as individuals in the economy The pre-independence period was largely characterised by the existence of private banks organised as joint stock companies. Most banks were small and had private shareholding of the closely held variety. They were largely localised and many of them failed. The period from 1967 to 1991 was characterised by major developments, utz. social control on banks in 1967 and nationalisation of 14 banks in 1969 and 6 more in 1980. The period beginning from the early 1990s witnessed the transformation. ➡️ Banking Structure in India 2022 - New

Early Phase of Indian Banks, from 1786 to 1969

•  The first bank in India, the General Bank of India, was set-up in 1786. Bank of Hindustan and  Bengal Bank followed.
• The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called them Presidency banks. These three banks were amalgamated in 1920 and the Imperial Bank of India, a bank of private shareholders, mostly Europeans, was established.
• Allahabad Bank was established, exclusively by Indians, in 1865. 
• Punjab National Bank was set-up in 1894 with headquarters in Lahore.
• Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank and Bank of Mysore were set-up, 
•  The Reserve Bank of India came in 1935.
• To streamline the functioning and activities of commercial banks, the Government of India came up with the Banking Companies Act, 1949, which was later changed to the Banking Regulation Act, 1949.

Banking Sector Reforms from 1969 to 1991

• In 1955, government nationalised the Imperial Bank of India and started offering extensive banking facilities, especially in rural and semi-urban areas.
• The government constituted the State Bank of India to act as the principal agent of the RBI and to handle banking transactions of the Union Government and State Governments all over the country. 
• 7 banks owned by the Princely states were: nationalised in 1959 and they became subsidiaries of the State Bank of India. In 1969,14 commercial banks. nationalised. in the country were nationalised.
• in the phase of banking sector reforms, 7 more banks were nationalised in 1980. With this, 80% of the banking sector in India came under the government ownership. 

New Phase of Indian Banking System, Reforms after 1991

• This phase has introduced many more products and facilities in the banking sector as part of the reforms process.

• In 1991, under the chairmanship of M Narasiham, a committee was set-up, which worked for the liberalisation of banking practices.

• In this phase, the country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers.

• Phone banking and net banking are introduced. The entire system became more convenient and swift. Time is given importance in all money transactions. ➡️ Banking System of India-2022

Nationalisation Of Banks

The nationalisation of commercial banks took place with an aim to achieve Social Welfare, Controlling Private Monopolies, Expansion of Banking, Reducing Regional Imbalance. Priority Sector Lending and Developing Banking Habits.

In order to have more control over banks, in 19th July, 1969 Mrs Indira Gandhi the then Prime Minister nationalised 14 large commercial banks whose reserves were more than 50 crore. The main aim of nationalising was to reach clients in rural areas and provide them with more quality services. 

Following is the list of banks, which got nationalised at this time...

1. Allahabad Bank

2. Bank of Baroda

3. Bank of India

4. Bank of Maharashtra

5. Central Bank of India

6. Canara Bank

7. Dena Bank

8. Indian Bank

9. Indian Overseas Bank

10. Punjab National Bank

11. Syndicate Bank

12. UCO Bank

13. Union Bank

14. United Bank of India

 In 15th April, 1980 the banks with more than *200 crore of reserves got nationalised. 

Those six banks, which got nationalised are the following...

1. Andhra Bank

2. Corporation Bank

3. New Bank of India

4. Oriental Bank of Commerce

5. Punjab and Sindh Bank

6. Vijaya Bank

Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalised banks.

Conclusion.

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